View from City Road: Is a BNFL sale too hot to handle?

Could British Nuclear Fuels ever be privatised? It sounds an unlikely story, given the City's resistance to buying shares in nuclear power generating companies when the electricity industry was privatised.

That did not deter the management from suggesting yesterday that the business could be sold if the Government wanted to.

This is likely to raise gasps of horror among ministers, who are already shying away from trying to sell shares in Nuclear Electric before the next election - and who were cross with the management for pressing too enthusiastically in public for a sale.

BNFL would be an even hotter sale to handle, since it is the source of permanent public anxiety and the butt of every environmental group. Privatising it would be a gift to the opposition in the run-up to the election.

In fact BNFL could probably make a case, at least on paper, for being more privatisable than Nuclear Electric or Scottish Nuclear.

It is consistently profitable, making a return on capital for the Government of 10 per cent and paying a three times covered dividend, even though its profits have been slashed by delays in starting the Thorp reprocessing plant.

Whatever critics say about the controversial government decision this year to let Thorp start operating, the plant itself will be profitable for BNFL.

And the company also has a more realistic chance of developing its export business than the nuclear generating industry, with talk of reaching 30 per cent of turnover in short order.

There are no government subsidies or fossil fuel levies to complicate the accounts. And the balance sheet contains nuclear clean-up provisions no more frightening than those of the generators, and considerably smaller.

The auditors have qualified the accounts, again, because of BNFL's failure to resolve an argument over how any cost over-runs on nuclear fuel reprocessing are shared with the Government and the generators. That will have to be resolved soon and is ultimately something for the Government to decide.

Even in the extremely unlikely circumstance that the Government abandoned power from the atom forever and wound down Nuclear Electric and Scottish Nuclear, BNFL is one organisation that would have to be allowed to soldier on, perhaps for centuries.

You can shut down power stations, but the nuclear waste in them won't go away. Is this a management pipe dream or a realistic possibility? There is no way a reluctant City could be persuaded to invest in BNFL as a whole. But like the UK Atomic Energy Authority, parts of it might just be saleable, even if the most suspect activities have to stay in state hands.