Call for nuclear sell-off rethink

Scottish Nuclear yesterday called on the Government to rethink its plans for privatising the nuclear industry and said any idea of merging it with Nuclear Electric would be "damaging and disappointing".

Dr Robin Jeffrey, chief executive, said that hundreds of Scottish jobs would be at risk in the event of a merger between the two nuclear generating companies north and south of the Scottish border. The issue of nuclear privatisation is expected to be discussed by the Cabinet tomorrow.

The Government is considering a merger as a precursor to the privatisation of the nuclear industry before the next election, which could raise as much as £3bn. John Major, the Prime Minister, officially confirmed yesterday that: "Privatisation of the two nuclear generators before the next election is an option actively under consideration."

He also said that the Government is looking at the future of the £1bn annual subsidy for Nuclear Electric, raised through a levy on electricity bills in England and Wales. A White Paper on the future of the industry will be published in May, and follows a protracted review of the future of the industry. The review was first promised when nuclear power was excluded from privatisation of the electricity industry four years ago.

Dr Jeffrey said he has no objection to privatisation, but added: "We believe that to be bundled and sold off as part of a larger nuclear company would be deeply disappointing. Our latest results demonstrate the highly encouraging commercial success of a company which was more or less cast aside five years ago."

He was speaking as Scottish Nuclear announced net profits of £150m in the year to 31 March from £72m the previous year. Excluding the benefit of some £120m in subsidies, profits were £31m.

The subsidy is separate from the nuclear levy paid by the Government to support Nuclear Electric and comes from a Government-imposed pricing agreement with Scottish Power and Hydro-Electric, which buy the output from Scottish Nuclear's Advanced Gas Cooled reactors, Hunterston B and Torness.

Dr Jeffrey attributed the improved performance to a 20 per cent increase in output and the lower fuel services costs negotiated with British Nuclear Fuels. He also praised the "magnificent performance" of the staff.

Scottish Nuclear is believed to have rushed its results out ahead of schedule in advance of the Cabinet meeting. Dr Jeffrey said: "Our results year-on-year demonstrate our ability to reduce costs safely to a point where, if the decision is taken to privatise the nuclear generators, Scottish Nuclear will be ready to take on the challenges that this will bring."

The company now claims to beat Nuclear Electric in terms of generating costs, but a spokesman for Nuclear Electric said: "Our AGRs are consistently equal to or better that Scottish Nuclear's on costs."

Nuclear Electric submitted a briefing to the Government some weeks ago calling for a merger. It argues that a merged company would create a credible force in the global power market which it regards as essential for its long-term strategy.

Plans for a merger would almost certainly be opposed by the electricity regulator, Offer, on the grounds that it would reduce competition.