Failed BNFL sale cost DTI £18.6m

By Jason Niss
Monday 30 December 2013 04:13
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The Department of Trade and Industry paid £18.6m to City advisers who worked on the failed plan to privatise British Nuclear Fuels (BNFL), The Independent on Sunday has learned.

Nearly half of that bonanza – some £8.76m – went to the disgraced accounting firm Andersen, which has all but closed its doors after the Enron scandal. However, Andersen, which in the UK has been taken over by Deloitte & Touche, is still working with the DTI on a fresh restructuring plan for BNFL, launched earlier this month.

Figures released by energy minister Brian Wilson detail the massive amounts spent between July 1999, when the plan was announced, and last December, when the DTI gave up on the part-privatisation.

City bankers CSFB received £6.22m in fees while another merchant bank, HSBC, was paid £802,000. Law firm Slaughter & May was paid £879,000, while £8.76m went to Andersen and £1.63m was received by Deloitte & Touche, which has now merged with Andersen. Some £363,000 was shared between two pensions consultants – Lane Clark & Peacock and Mercer.

The grand total of £18.6m is not the limit of the amount spent on the failed plan. BNFL also received advice from a number of City firms including merchant banker NM Rothschild and accountancy firm Ernst & Young.

BNFL refused to say how much it paid for their advice, claiming commercial confidentiality. However, last week The Independent on Sunday revealed that Ernst & Young, BNFL's auditor, had received £13m in fees over the past three years, most of which was for consultancy work.

Further investigations have revealed that the total amount received by Ernst & Young since it became BNFL's auditor in 1988 now totals £32.1m, of which £6.96m was for auditing and £25.1m for consultancy.

The plan to part-privatise BNFL was scuppered because of the massive liabilities incurred by the group due to the costs of cleaning up the nuclear sites it owns and operates.

Earlier this month it revealed a £2.09bn loss for the year to 31 March 2002, caused by a £2.38m extra provision for cleaning up the sites.

Mr Wilson is now proposing to create a Liabilities Management Agency (LMA) that would take on the costs of cleaning up the fallout from BNFL, the UK Atomic Energy Authority and the Ministry of Defence's nuclear weapons programme.

The House of Commons Trade and Industry Committee raised serious questions about setting up the LMA in a report published last week. It was concerned about what proportion of the £12bn of current nuclear liabilities would be transferred from BNFL to the LMA and questioned whether any of BNFL's commercial contracts or £1.8bn cash pile would also pass to the LMA. It is understood that talks are continuing that are likely to lead to BNFL giving up a share of its financial resources and commercial income.

The MPs also criticised Norman Askew, BNFL's chief executive, for failing to deliver a full set of the group's accounts. They said he promised the accounts would be published by 16 July but they will not be available until August. A BNFL spokesman said this was a misunderstanding between the MPs and Mr Askew.

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