Sellafield privatisation set to raise up to pounds 3bn

THE PRIVATISATION of British Nuclear Fuels, the state-owned reprocessing company that owns Sellafield, is likely to go ahead in the next 18 months and could raise almost pounds 3bn for the Government.

KPMG, which was appointed last month by the Secretary of State for Trade and Industry, Peter Mandelson, to advise on privatising BNFL, is due to submit its report next month recommending ministers proceed with a share sale.

The prospects for a flotation were given a boost yesterday after the Environment Agency gave approval for production to start at Sellafield's controversial Mixed Oxide Fuel (MOX) plant. The pounds 300m facility makes reactor fuel out of a mixture of plutonium and uranium. Approval for the plant will add to the controversy surrounding Sellafield because it could lead to increased imports of foreign plutonium.

Privatisation is unlikely to happen until 2000 because of the complexities of preparing BNFL for sale and the need to ring-fence its liabilities.

Sellafield has pounds 18bn worth of reprocessing contracts from British Energy, and nuclear electricity generators in Japan and Germany. Analysts believe the Thorp reprocessing plant at Sellafield, which reprocesses spent fuel from the Sizewell PWR and Japanese stations, could be sold off easily.

BNFL's US subsidiary, BNFL Inc, which is awaiting regulatory approval to take over Westinghouse's nuclear operations, would also be an attractive candidate for privatisation, analysts believe.

However, Friends of the Earth says it will be impossible to privatise Sellafield after it was refused permission earlier this year to site an underground intermediate waste disposal dump on the site.

Friends of the Earth also estimates that privatising BNFL could leave the taxpayer with a pounds 30bn bill. The Magnox reactors, which BNFL took over from the Government a year ago, have liabilities alone of pounds 18bn to pounds 34bn, according to a report by the Science Policy Research Unit at Sussex University. Environmentalists described approval for the MOX plant as "a farce".

Dr Dominick Jenkins, of Friends of the Earth, said the process was fraught with danger. "It increases the risk of nuclear proliferation because MOX fuel can be turned back into plutonium. Another problem is that once you have burnt up the MOX fuel you are left with a form of nuclear waste which is worse than the usual kind.

"It is also bad economics because MOX fuel costs several times as much as uranium fuel."

The Environment Agency carried out a study of the financial viability of the Mox Plant, which was based on work by independent financial specialists. PA Consulting Group concluded the MOX plant would produce a "strong level of operational profit" although the figures it gave could amount to less than the original pounds 300m cost of the plant's construction.

The report said the profit "is unlikely to be less than pounds 100m, exceeds pounds 300m in many options, and, on average, amounts to pounds 230m".