Reprocessing? No thanks

British Nuclear Fuels admitted yesterday that it might have to think the "unthinkable" and switch to storing rather than reprocessing nuclear waste after conceding that its two biggest overseas customers may never place any more orders.

Such a move would force it to write off £460m invested in the controversial mixed oxide (Mox) facility at Sellafield, Cumbria, and mothball the £1.8bn Thorp reprocessing plant, putting thousands of jobs at risk.

Appearing before the Commons Trade and Industry Select Committee, senior BNFL executives conceded that further German orders were "in doubt" while there was little prospect of new contracts from Japan unless the scandal over falsified safety records at Sellafield was resolved.

Asked whether the company would have to examine storing instead of reprocessing the spent fuel, Hugh Collum, BNFL's chairman said: "We must be in a position to look at the unthinkable. Over the course of time we will look at these alternatives. We have no plans to change our strategy. If we have a viable profit base we have no intention of getting out of reprocessing, but we must be prepared to look at alternatives."

A Green Paper due out in the next two months is expected to recommend a move towards storage of spent fuel while British Energy, BNFL's biggest domestic customer, has also questioned the economics of reprocessing.

Mr Collum told MPs that BNFL was likely to miss all six government-set targets for improving safety, environmental and financial performance this year. The admission further explains why the Energy minister, Helen Liddell, was forced on Wednesday to shelve the £1.5bn part privatisation of BNFL until after the next general election.

The Government "scorecard" requires BNFL to improve productivity, profitability, health, safety and environmental performance, cut costs by 25 per cent and increase United States profits to 15 per cent of the group total.

But Mr Collum questioned whether there was any point in having targets it could not meet and added: "We have had a poor year. We will be lucky if we achieve any of the targets."

Earlier, he admitted that BNFL had been "badly damaged" by the scandal over falsified Mox fuel records - first revealed in The Independent - a damning report by the Nuclear Installations Inspectorate (NII) and the subsequent banning of Mox shipments by Japan and Germany. But, he added: "[BNFL] is too important just to throw away in a knee-jerk response to the current pressures and criticisms it is facing. A reformed BNFL will have major advantages for Britain and its people."

The company has "baseload" reprocessing contracts worth £12bn for the Thorp plant which run until 2004-2005. But Germany has still to deliver half the spent fuel that BNFL is contracted to reprocess. If the Germans were to renege on their remaining contracts, it would wreck the economics of Sellafield, leaving the company with insufficient funds to set aside to decommission the Thorp plant.

The ending of reprocessing would also sound the death-knell for the Mox plant, which BNFL expects to generate up to £2bn of business and more than 10 per cent of profits in future.

Norman Askew, who was appointed chief executive of BNFL earlier this month, said the company hoped to resolve the row with its Japanese customer, Kansai Electric, in the next two months. The Japanese have warned that they will veto any further business with BNFL unless a consignment of Mox fuel already in their country is shipped back to Britain.

Mr Askew also said he was confident that BNFL would be able to meet all the 28 criticisms raised in the NII's report and produce an acceptable safety plan for Sellafield by the deadline of 18 April.

Five process workers have so far been sacked. But six months after the falsification of data on fuel pellets first came to light, the chief executive said BNFL was still reviewing whether more senior management should be disciplined.

The Commons committee chairman, Martin O'Neill, warned that the National Audit Office would be brought in to examine BNFL's report and accounts if they were not made more "intelligible". "The industry as a whole has treated the Government, parliament and the country with a degree of disdain with regard to getting hard financial facts," Mr O'Neill complained.