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Magnox merger deadline agreed

Hopes of a pre-election breakthrough in merger talks between Magnox Electric, the state-owned company which runs ageing nuclear power stations, and British Nuclear Fuels, the reprocessing organisation, have risen after the two sides agreed to a provisional deadline in negotiations with the Government.

Ministers aim to transfer responsibility for Magnox Electric, created last April in the restructuring of the nuclear industry, to BNFL, which does much of the decommissioning work at its Sellafield complex. The talks became deadlocked because of BNFL's unhappiness at having to take over part of Magnox's pounds 8.9bn decommissioning costs.

However, in a private exchange of letters between Lord Fraser, energy minister, Mark Baker, Magnox chairman, and John Taylor, BNFL chief executive, the three sides agreed to work towards securing a deal by the end of next month. Letters of intent to seal the agreement are due to be signed in March, with the merger completed in April 1998.

Sources suggested that though the timetable had been agreed, there was much work to be done on how to bridge the huge funding gap. Of the pounds 8.9bn estimate for decommissioning all nine of Magnox's reactors, some pounds 1.3bn still has to be found. The Government last year agreed to guarantee pounds 3.7bn of the costs, while Magnox has set aside cash and future revenue streams worth pounds 3.9bn.

Though BNFL is state-owned it in effect runs as a private business and has made clear to ministers it would refuse to take on pounds 1.3bn of liabilities without Treasury help. BNFL has set its sights on commercial reprocessing and waste management work overseas.