Tom Feilden reports for BBC Newsnight

Built at a cost of £300m, the Mox plant was recently given the go-ahead to start making a blended fuel for use in nuclear reactors around the world - subject to a final decision by ministers.

But the BBC's Newsnight programme reports that the new social democrat-green coalition in Bonn is threatening to make German utilities renege on their contracts with Sellafield.

If this is allowed to happen, it will knock a big hole in the Mox plant's financing.

Spent fuel

Mox is a mixture of plutonium and uranium which have been recycled from the spent nuclear fuel rods sent to another of Sellafield's facilities, the Thorp reprocessing plant.

German greens have campaigned against nuclear power

With plutonium no longer needed for use in the abandoned fast breeder reactor programmes around the world, and with nuclear powers getting rid of their atomic weapons, a large stockpile of this highly toxic metal is starting to build up.

A recent report commissioned by the Royal Society estimated that by 2010 the UK's stockpile of separated plutonium would top 100 tonnes raising fears about a possible accident and even theft.

Mox offers a solution to the problem: if the plutonium can be blended into a new fuel, the stockpile that so concerns the Royal Society could be cut. But the new political climate in Bonn now threatens to undermine this thinking.

The German Government has already declared its intention to abandon the reprocessing of old fuel rods in favour of long-term storage. It has promised to make a decision on the future of its existing overseas reprocessing contracts early in the new year.

Different views

British Nulcear Fuels Limited (BNFL), the company that runs the Mox and Thorp plants, has contracts to reprocess over a 1,000 tonnes of spent German fuel over the next ten years. Not surprisingly, the parties involved take a different view on whether these contracts can be renegotiated.

Hans Wiedermann: "No obligation"

The contracts signed by BNFL and the German utilities operating nuclear reactors are underpinned by an understanding between the two governments which were set out in an exchange of letters between ambassadors in 1990.

Hans Wiedermann, the business manager for the German nuclear operator GKN, believes a force majeure clause in the contracts allows the company to walk away from the deal without penalty if either government were to break the terms of that wider agreement.

"In case the governments outlaw reprocessing, it's force majeure," he told Newsnight. "As the English say: 'an act of god'. It means we have no obligation anymore to deliver fuel and no obligation to pay for fuel we have not delivered."

This is an interpretation that BNFL disputes.

BNFL position

"They're contracts that were checked out by our lawyers," said BNFL's Jeremy Rycroft.

"They're underpinned by intergovernmental letters. The UK Government and the German Government exchanged letters in which undertakings were given not to interfere with the contracts."

But the idea that the German utilities could pull out of their contracts with BNFL is confirmed by Professor Hans Traube, the former head of Germany's fast breeder reactor programme and an adviser to the social democrats on nuclear energy.

An enthusiastic supporter in its heyday, he argues that reprocessing no longer makes sense.

"The decision of the German Government to stop reprocessing is overdue," he told Newsnight. "Reprocessing after giving up fast breeder reactors doesn't make any sense anymore.

"It's expensive. It is dangerous _ [plutonium] is the most dangerous stuff in the world. It is utterly poisonous and is the raw material for bombs."

Policy framework

Last month, the UK Environment Agency gave approval for the new Mox plant to open, subject to a final decision by ministers.

Spent fuel is stored in ponds

But the agency's report again highlighted the need for a wider policy framework on the management of plutonium and complained that its consultants were not able to make a proper assessment of the full economic case for opening the plant.

Under the terms of its enquiry, the agency was unable to take construction costs into account when considering whether the plant would make a profit. Its consultants estimated the plant might make £300m over its lifetime, but the figure was much more likely to be about £230m, or even £100m.

In other words, it could make a considerable loss and when the time comes to close it, decommissioning could be much more expensive than anticipated.

Energy economics

This has led one of the UK's leading energy economists Gordon McKerron to conclude that there are serious flaws in BNFL's case for Mox.

"In the past when BNFL have justified other things like the Thorp reprocessing plant, they showed real contracts for reprocessing services," he said.

Jeremy Rycroft: Contracts are secure

"This time we haven't seen any contracts at all. Japan is the only place which plausibly might want Mox and as far as we know there are no contracts yet - and the Japanese have never used it.

"You've then got France, Belgium and Switzerland who do use it, but are supplied by France and aren't going to get it from BNFL. Germany, which was a significant hope for BNFL, has used Mox, but is now likely to have its enthusiasm for it curtailed under the new government."

This assessment is rejected by BNFL who say they really do have binding contracts for Mox fuel.

"For reasons of commercial confidentiality, we wouldn't want to go into the position on individual contracts and individual discussions," said Jeremy Rycroft.

"We are, however, confident that all our Thorp customers will commit to have their plutonium returned as Mox and we're at various stages of negotiation.

"We've already have contracts in Switzerland, Germany and Japan.