Page last updated at 16:41 GMT, Thursday, 30 March 2006 17:41 UK

The sale of Britain's nuclear giant

By Jorn Madslien
BBC News business reporter

State-owned British Nuclear Fuels' (BNFL) decision to sell its clean-up subsidiary is unlike any other commercial transaction ever undertaken.

Dounreay
Global companies will compete for contracts to clean up the waste

Not only will the sale of British Nuclear Group (BNG) decimate its parent company, which will be left with just a few hundred workers. It will also fail to raise much cash.

Offers in the region of 1bn ($1.7bn) are expected when the auction starts sometime early next year, analysts say. Hence the income from the actual sale will do little to bolster the Treasury's coffers.

"The trick here will be to get the most appropriate contractor," says Sir Anthony Cleaver, chairman of the Nuclear Decommissioning Agency, which has just published a strategy for the decommissioning of Britain's nuclear power plants and the clean-up of existing waste.

Early entrant

BNG is currently operating the Sellafield site, which is owned by the NDA.

Following the sale it is expected to continue to do so for at least a further five years.

Hinkley Point
The Magnox power stations will be gradually phased out

In return, the NDA will pay BNG 5bn. On top of that, exceptional speed and efficient performance will be rewarded by the NDA.

If BNG's first five years under a new owner are successful, the contract can be extended, Sir Anthony says.

Alternatively, other industry players will be invited to bid for the contract.

In other words; the people who buy BNG will not acquire a company in the conventional sense.

They will not become the owner of any assets, nor will they become a permanent employer of BNG's current staff. They are basically buying a contract.

"The people who actually work on the site will move to the new owner [of the contract]," explains Sir Anthony in an interview with the BBC News website.

Nevertheless, there are still potentially enormous possibilities awaiting those who end up buying BNG.

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High-level waste storage

As an early entrant into Britain's privatised decommissioning and clean-up industry, the new BNG will get a chance to prove its mettle.

This should significantly raise its chances of bidding other contracts paid for out of the NDA's money pot, which is estimated to total 72bn over the next 75 years.

Some of the money - 14.1bn to be exact - will go towards running existing commercial operations until their planned closure dates, and some of these operations generate an income for the owner, the NDA.

Likely bidders

Operating and sorting out Sellafield is the largest single contract to be awarded by the NDA, but there are plenty of other deals up for grabs.

In 2008, contracts for the clean-up of high hazard waste at Dounreay will be awarded, along with contracts to decommission a string of Magnox power plants at Berkeley, Bradwell, Hinkley Point, Dungeness and Sizewell.

Sir Anthony Cleaver, chairman of the Nuclear Decommissioning Authority
Sir Anthony hopes competition will help curb costs and speed up progress

The following year will see the signing of contracts to decommission further Magnox plants at Calder Hall, Chapelcross, Hunterston, Trawsfynyudd, Oldbury and Wylfa. Hwrwell and Winfrith work will also be awarded.

BNG, which is expected to continue operating will no doubt be keen to take on some of this work, though it will face tough competition from its global rivals.

"I hope to get the very best from around the world," insists Sir Anthony. "We're talking to the French, for example... and I had a visit this week from the Japanese."

Yet most of the pitches are expected to come from US industry giants such as Halliburton, Bechtel, Fluor and the Washington Group, as well as from Britain's Amec, analysts predict.

"We don't think there's likely to be a shortage of bidders," says Sir Anthony, who hopes private sector involvement in the industry could, along with future technological developments, help bring about savings while at the same time accelerate the decommissioning and clean-up process.

"Once one brings in a competitive process, it is possible to get significant reductions in cost, and that's what we expect to do," he says.

Anyone bidding for contracts will need a strong track record, says Sir Anthony.

"You won't even get through the sieve, so to speak, unless you have a safety record that we find satisfactory," he says.

Safety is paramount, as is an ability to efficiently work with the existing workforce, Sir Anthony explains.

Mike Graham, national officer of Prospect, which represents 11,000 workers in the nuclear industry, agrees.

"The main focus for us is to focus on the quality of the companies coming in," he says.

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