BNFL in talks with Washington for new $500m nuclear reactor

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BNFL is in talks with the US Department of Energy about leading a consortium to build a $500m (£267m) nuclear reactor at its research centre in Idaho.

BNFL is in talks with the US Department of Energy about leading a consortium to build a $500m (£267m) nuclear reactor at its research centre in Idaho.

Westinghouse, BNFL's US-based technology and services arm, has been holding preliminary talks with the Americans about building a high- temperature, gas-cooled reactor.

No official contract to build the reactor has been tendered, but it is expected this will happen later this year.

BNFL is proposing to use the same Westinghouse-led consortium which is building a new generation of reactors in South Africa. The operator of the Sellafield reprocessing site in the UK is a big shareholder in the South African consortium, PBMR, which will build 10 new "pebble bed" reactors, costing around $170m each.

The news comes as Westinghouse moves closer to bidding for the largest nuclear construction contract in history. China wants to build at least 30 large nuclear reactors, at an estimated cost of $1bn each. It will offer the Chinese its AP1000 reactor model, which was recently licensed in the US. It is in competition with the French state- owned group Areva.

If Westinghouse wins both contracts, BNFL is expected to speed up plans to sell the subsidiary. Westinghouse already operates independently to make a demerger easier.

Washington resolved a long-standing dispute between the Department of Energy and BNFL last week. It agreed to pay BNFL around $500m to cover losses on nuclear clean-up contracts in Tennessee and Idaho which BNFL signed without doing proper due diligence. The contracts cost much more than it anticipated. Even with the pay- out, BNFL's net loss on the contracts is expected to be $1bn.

The deal was brokered by Patricia Hewitt. The Trade and Industry Secretary is also involved in discussions to sell BNFL's main operating subsidiary, British Nuclear Group (BNG), which would be tantamount to a break-up of the group. It is understood that the Government has approached US companies Bechtel and Lockheed Martin about the possible sale.

The Government had planned to part-privatise BNFL but scrapped the idea two years ago. The financial collapse of nuclear generator British Energy made raising finance in the City impossible while uncertainty over who will meet clean-up liabilities - and over future government energy policy - continues.

BNFL's nuclear liabilities - which include the troubled Sellafield plant - will be transferred in April to a Government agency, the Nuclear Decommissioning Authority (NDA). This will leave BNG free of liabilities and in a position to bid for clean-up contracts from the NDA.

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