Privatisation issue holds up nuclear industry review: Treasury and DTI at odds over terms of promised inquiry

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THE GOVERNMENT'S long-awaited review of the nuclear industry is being further delayed because of a disagreement in Whitehall over whether it should look again at privatising Nuclear Electric, the state-owned generator.

The Treasury is thought to be keen to examine the potential for a sale, which some industry observers say could raise up to pounds 3bn. The Department of Trade and Industry favours a narrower remit for the review, but addressing issues including the use of private money for investment in nuclear plant.

Nuclear Electric was formed five years ago after Britain's nuclear power stations were hastily withdrawn from the privatisation of the electricity industry.

The embarrassing retreat was fuelled by fears over the high cost of nuclear-based electricity and the liabilities shareholders could face because of the massive cost of decommissioning plant and managing the waste. The Government promised a review of the industry in 1994 and subsequently brought the date forward to last year.

However, the terms of the review have yet to be published and Timothy Eggar, the energy minister, said last week: 'It has turned out to be more complex than anticipated.'

Mr Eggar told the Trade and Industry Select Committee: 'We have had a large number of representations on what the review should cover from every conceivable point of view.' He said that no decision has been taken whether nuclear power should be privatised.

The minister has clashed with Nuclear Electric over the company's persistent lobbying to be privatised. It has 25 per cent of the electricity generating market in England and Wales and has been courting the City in recent months. It hopes that it can interest the private sector in financing a second pressurised water reactor at Sizewell in Suffolk.

Nuclear Electric is cutting 2,000 jobs this year and has increased its operating efficiency. The company says that it will be ready for privatisation in 1995. Operating profit in the first half of the year rose 95 per cent to pounds 497m from pounds 255m a year earlier.

However, without a subsidy of pounds 615m, which is raised through a levy on electricity bills, the result in the half-year would have been a loss of pounds 118m. The levy, more than pounds 1bn a year, expires in 1998.

Besides the privatisation issue, the review is thought to have been held back by the furore over British Nuclear Fuels' Thorp reprocessing plant in Cumbria.