Byers set to unveil pounds 2bn BNFL sell-off

Click to follow
The Independent Online
THE GOVERNMENT is poised to unveil plans to raise pounds 1bn-pounds 2bn by selling off a stake of up to 49 per cent in BNFL, the state-owned nuclear reprocessing company which owns the Sellafield complex in Cumbria.

Stephen Byers, the Secretary of State for Trade and Industry, is expected to announce in the next fortnight that the Government is proceeding with the partial privatisation of BNFL and is appointing City investment bankers to advise it.

The sale is likely to take the form of a flotation of between 30 and 49 per cent of the company. Provided less than 51 per cent of BNFL is disposed of, the Government can go ahead with a public offer without the need for primary legislation.

A key element of the flotation will be an offer of shares to BNFL's 20,000- strong workforce. Unlike plans for the partial privatisation of the Post Office, the unions at BNFL support a sell-off and the commercial freedom it will give the company.

Following last year's $1.2bn acquisition of Westinghouse's nuclear business in the US, BNFL is believed to be keen to buy the nuclear division of ABB in Europe, which has sales of about pounds 400m.

The sell-off will involve the whole of BNFL, including the Magnox nuclear reactor division which it took control of last year and which accounts for about half the group's pounds 27bn in nuclear liabilities.

BNFL has an order book of pounds 15bn, including pounds 12bn worth of reprocessing contracts mainly from overseas customers, for its Thorp plant at Sellafield. It is also close to being given full government approval to start commercial production of mixed oxide fuel at its pounds 300m MOX plant at Sellafield, which the company says could bring in additional sales of pounds 1bn-pounds 2bn a year.

One of the key sticking points for investors will be the level of "back end" liabilities for decommissioning and waste management that BNFL carries with it into the private sector.

BNFL is likely to shoulder all the liabilities, except for pounds 2bn-pounds 3bn worth relating to military work dating back to the days when Sellafield was called Windscale. The company says that 75 per cent of its liabilities are already covered.

It also believes that by extending the lives of its eight Magnox stations it can generate operating profits of pounds 70m-pounds 140m. It argues that it can make additional profits by eliminating the Magnox liabilities for less than the pounds 3.7bn discounted cost estimated when it inherited them.

Anti-nuclear campaigners claim, however, that the true undiscounted level of BNFL's liabilities totals pounds 39bn - leaving a huge gap to be funded either by taxpayers or private investors.

A government source said: "These are the sort of issues we can thrash out with the City once we have gone public and show we are serious about what we want to do with BNFL."

Outlook, page 21