View from City Road: Nuclear industry too hot to sell

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Nuclear Electric would like it to be otherwise, but for the moment there is only one part of the organisationally challenged British nuclear industry that is being privatised - AEA Technology, the commercial arm of the UK Atomic Energy Authority. A date has yet to be fixed but there seems little doubt that with the fat trimmed and the losses slashed it can be sold successfully.

All kinds of meanings are being read into this small beer sell-off; Nuclear Electric sees in it a harbinger of things to come - the sale of the nuclear industry as a whole. This hardly seems realistic, however. AEA Technology is a fine and highly regarded little company, but in essence it is just a consultancy. Not for AEA Technology the billions of pounds of decommissioning liabilities its parent, the Atomic Energy Authority, has on its books. Those will be left in the public sector. Nuclear Electric is in much the same position. It might be possible to leave some of its decommissioning liabilities with the state, but most are bound to remain since the operation of nuclear plants is its bread and butter, the base from which it has captured a quarter of the electricity generating market in England and Wales.

Nor is it just the public interest issues that make Nuclear Electric so difficult to privatise. Oliver Pawle, corporate finance managing director at UBS, said at an energy policy seminar in London yesterday that the City would demand soaring rates of return to take account of decommissioning risk. The possibility of a nuclear catastrophe, however remote, coupled with the fact that there is probably insufficient capacity in the insurance industry to insure such a risk, makes matters worse.

Nuclear Electric has already spent many months and countless lunches courting the City and media, but according to Mr Pawle there is still a 'massive' programme of education to be done if the nuclear sector is ever to be privatised. AEA Technology may be a start, but so far Nuclear Electric isn't even out of kindergarten.