Stand by for the purr of the nuclear fat cats

Privatisation/ rich pickings

IT'S going to happen again. After water, after electricity, after gas, the Government's latest privatisation venture, that of Britain's nuclear power generating industries, is set once more to bestow millionaire status on a select handful of senior executives, and make a number of others very, very rich.

No matter that public outrage has steadily grown with each revelation about trebling and quadrupling salaries, and six- and seven-figure share options becoming available for the lucky managers of the utilities as they were privatised. As surely as night follows day, nuclear privatisation too will generate another crop of fat-cat pay packets.

Next spring the two public companies which at present run the nuclear power stations, Nuclear Electric in England and Wales, and Scottish Nuclear north of the border, will be placed under a new private sector holding company with a value on the whole enterprise of around pounds 3.4bn (although the present companies will continue as operating units with their present demarcation).

Then, their old public sector boardroom salaries are likely to be swept away in favour of market-led numbers, that will include a bonuses and share options regime aimed at reflecting a Financial Times Top 100 company status on the as yet unnamed "UK Nuclear PLC".

The pay of the nuclear industry's most senior executives will very likely nearly double. For example, the nuclear industry's highest-paid job is at present that of full-time chairman of Nuclear Electric, for which John Collier receives a package of pounds 252,000. But after privatisation the most lucrative post will probably be that of chief executive of the nuclear holding company at a salary, research suggests, likely to be around pounds 435,000.

As in the other privatised utilities, however, it is the increasingly controversial mechanism of share options that is likely to make executives genuinely rich.

At this level in private industry there is a virtual standard offer, to attract and retain top executives, of share options, or some form of share award, worth four times annual salary. This could deliver to the chief executive of the nuclear holding company a package worth pounds 1.74m. A relatively small post-privatisation success in stock values will leave old public pay looking insignificant.

The Independent on Sunday asked both of the present companies if any of their directors would like to comment on their post-privatisation pay expectations. A spokesman for Nuclear Electric said: "Collectively we have declined to comment on future salary scales. But we have made it clear that fat-cat salaries is not the reason for privatisation. We are seeking to benefit the company."

In consultation with leading remuneration experts, the Independent on Sunday - using the Government's pronouncements on the shape of UK Nuclear PLC, the current pay packages revealed in annual reports of the two nuclear companies and financial databases of private sector companies - has worked out the likely pecuniary rewards of those at the helm of UK Nuclear.

Merging the pounds 2.9bn turnover of Nuclear Electric with the pounds 0.5bn of Scottish Nuclear, will create one of Britain's largest firms. Those at the helm in the private sector will seek the rewards of their peers. Even allowing for hype and public relations hot air in the run up to Michael Heseltine's privatisation announcement in the House of Commons on 9 May, it is clear that senior executives in the nuclear industry are relishing the end of public sector life.

Last week with the appointment of Wellcome's former chairman, John Robb, 59, as the part-time chairman of the new holding company, one head-hunting agency expecting to place candidates in the top vacancies said: "We are already on, how shall I say, full battle alert. There are prize jobs at stake. And by the end of next week we expect Mr Robb's mail to be full of CVs and his secretary to be pestered with diary melt-down."

As a part-time chairman of the holding company, Mr Robb, according to leading remuneration advisers, would expect to earn pounds 170,000 for his time.

His board will comprise as deputy chairmen the two chairmen of the main subsidiary companies. For John Collier in England and James Hann in Scotland this is likely to mean an additional pounds 40,000 for their time on the holding board.

Mr Collier's current pounds 252,000 would be expected to jump to a post-privatised pounds 270,00 in Nuclear Electric itself; with pounds 40,000 from the holding company his pay could well be pounds 310,000. Despite reduced responsibility on Nuclear Electric itself (handed to the holding company board) Mr Collier could nevertheless expect in a similarly-sized FTSE 100 company a share options deal worth about four times salary, of pounds 1.12m.

Mr Hann's current pounds 69,000 chairmanship earnings is estimated to rise to at least pounds 90,000 in Scottish Nuclear after privatisation; with pounds 40,000 from the holding company his pay could well rise to pounds 130,000. He may be allowed to qualify for share options on the holding company pay which would mean a share package of pounds 160,000.

With nuclear industry analysts anticipating that expertise will try to be retained, and key jobs filled from the existing ranks, the new holding company's chief executive post is potentially the most lucrative piece in the nuclear jobs jigsaw. The current favourite is Scottish Nuclear's chief executive, Robin Jeffrey. The overall chief executive can expect a new top nuclear pay package of pounds 435,000, and a share options scheme equal in value to four times salary is likely to be on offer - that would amount to approximately pounds 1.75m.

One energy analyst said: "There will be strong efforts not to make the same mistakes we've seen in other privatised utilities. But this is still an FTSE 100 company. The initial share option price could be delayed till the cobwebs of the public sector have been blown away. Then accusations of a giveaway could be avoided. Alternatively, a restricted shares deal, with shares held in a trust for a given period, could be used."

If Mr Jeffrey stays at a somewhat expanded Scottish Nuclear the private sector world may need to enhance his current pounds 130,000 to pounds 195,000. A share package of pounds 780,000 would be likely to follow.

His current opposite number as chief executive of Nuclear Electric is Dr Robert Hawley. Although Nuclear Electric's responsibilities will in some ways be smaller (its ageing Magnox reactors will remain in the public sector) Dr Hawley's salary of pounds 239,000 is certain not to fall, to say the very least, and he would probably be in line for share options worth pounds 956,000.

Scottish Nuclear's finance director, Richard Barnes, presently on pounds 80,000, would be likely to see his salary jump to pounds 110,000; his share options package could be worth pounds 440,000.

Five more executive directors of Nuclear Electric, whose average salary is pounds 140,000 now (the company accounts do not break them down individually), would, even with no pay rise, be likely to receive share options worth pounds 560,000.

Crucially, no board member of either Scottish Nuclear or Nuclear Electric is estimated to be worse off post-privatisation. Even though corporate strategy and responsibility would be the domain of a ruling holding company, the boards of the two subsidiaries, with share incentive schemes, will almost certainly lead to very much richer boardrooms in the future.

Photograph of Dungeness power station by Andrew Hasson