British Nuclear Fuels has lost a multi-billion-dollar contract with the American government because of doubts about its management.
The Hanford plant in Washington state, where plutonium for America's nuclear weapons was made, has 177 tanks of highly radioactive material. In what would have been one of the world's biggest nuclear clean-up operations, BNFL had proposed to turn the waste into glass for disposal but its US subsidiary shocked Washington with a massive increase in the cost of the contract.
The company originally said the project could be completed for about $7bn (£4.6bn), but in an estimate last month, that figure rocketed to $15.2bn.
Late on Monday night, T J Glauthier, the deputy energy secretary, announced that the Hanford contract would be taken away from BNFL. Washington also had serious concerns about BNFL's "management and business approach", Mr Glauthier said.
The blow to BNFL follows its admission that safety records at the Mox plant at Sellafield were falsified. The practice was first disclosed by The Independent and confirmed in a highly critical report by nuclear watchdogs.
Bill Richardson, the US Energy Secretary, said the decision had been made "after BNFL's proposal was found to raise serious concerns in many areas, including cost and schedule, management, and business approach. Its technical design was found to be sound, but was also found to be overconservative, shifting risk from the contractor back to the US government."
Mr Glauthier said: "We've been pretty unhappy with their performance. We're very disappointed to have to take this action and to have to change directions now."
BNFL said: "While disappointed that the Department of Energy has decided to recompete the entirety of the contract, we are pleased they have determined that the design and technical solution is sound."
A decision on the new contract will be made by the end of the year. The French state-owned company Cogema has expressed interest.
The setback puts a further question mark over BNFL's rapid transformation into a global company. It is involved in a series of other clean-ups across the US, but the Department of Energy has said that it is reviewing the company's record and last week a US team went to Sellafield to examine its operations there.Reuse content