BNFL reveals £337m loss after series of errors

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The Independent Online

British Nuclear Fuels reported a £337m loss yesterday, raising fresh doubts about the future of the embattled operator of the Sellafield reprocessing plant in Cumbria. The deficit, the worst in the company's history, was accompanied by news that BNFL's nuclear liabilities have jumped by £7.1bn to £34.2bn, making a partial privatisation even less likely.

British Nuclear Fuels reported a £337m loss yesterday, raising fresh doubts about the future of the embattled operator of the Sellafield reprocessing plant in Cumbria. The deficit, the worst in the company's history, was accompanied by news that BNFL's nuclear liabilities have jumped by £7.1bn to £34.2bn, making a partial privatisation even less likely.

BNFL's huge loss for 1999-2000 was caused by a £411m charge to pay for a series of blunders, including the Mox plutonium fuel scandal at Sellafield, disclosed by The Independent last September.

The company's annual report for 2000 show that the two top executives who lost their jobs over the scandal received pay-offs totalling nearly £600,000. John Taylor, who was forced to quit as chief executive, received £300,000 while BNFL's former finance director, Ross Chiese, got £277,000.

The Mox incident, which led to Japanese and German customers cancelling their contracts with Sellafield, cost BNFL £113m. This included £40m compensation paid to Japan's Kansai Electric Power and a further £73m set aside to pay for bringing the shipment of Mox fuel back to Britain under armed guard, a process that could take two years.

BNFL also disclosed that the Mox Demonstrator Plant at Sellafield, where the falsification of safety data took place, would never be reopened for commercial production. Instead, the site will revert to being a "development plant" while BNFL awaits government approval to open a £400m commercial Mox plant, completed a year ago.

The City had been braced for a poor set of results from BNFL, but the scale of its losses surpassed the worst expectations. As well as the £113m Mox charges, BNFL had to take a £139m charge to cover losses on nuclear clean-up contracts in the US and a £151m charge to cover early closure of the Hinkley Point Magnox reactor in Somerset.

Hugh Collum, BNFL's chairman, said it had been a "disappointing year". The company's objective now was to improve operational and safety performance, he said. BNFL is still aiming at a partial privatisation in the second half of 2002.

Norman Askew, BNFL's chief executive, said he hoped to sign new Mox contracts with Japanese customers before the end of the year and obtain approval from the Government and the Nuclear Inspectorate to start commercial production in 2001.

But Friends of the Earth, an environmental pressure group, claimed that BNFL's "lifeline to commercial survival" had been put in jeopardy. Its energy campaigner, Mark Johnston, said: "BNFL is walking a financial tightrope. The company is only being kept afloat in the short term by the parts of the business for which a future market does not exist. It has only itself to blame."

BNFL's results for the current year will also be awash with red ink because of heavy charges to reorganise its US fuel manufacturing operations and the closure of the Wylfa reactor in Wales for safety reasons.

The increase in BNFL's nuclear liabilities to £34bn is the result of a review that concluded the company had underestimated the costs of decommissioning some of its operations at Sellafield. The liabilities for reprocessing spent fuel from BNFL's seven Magnox stations has also increased.

The £34bn represents the "undiscounted" cost of BNFL's nuclear liabilities over the next 85 to100 years. The cost in present day money or the "discounted" cost is put at £15.8bn.

BNFL said 88 per cent of these costs had already been provided for. But it accepted that City institutions would be reluctant to buy stakes in a company with this scale of liabilities. BNFL is now in discussions with the Government about how the liabilities should be shared by taxpayers and future private shareholders.

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