Treasury puts last-minute hold on BNFL's US deal

BNFL, THE state-owned nuclear reprocessing company, remained hopeful last night of getting a Government green light to take over Westinghouse's nuclear operations in the US after it emerged that the bulk of the $1bn liabilities it will inherit are non-nuclear.

Sources familiar with the protracted negotiations to gain UK approval for the deal also insisted that BNFL's joint bid for the business in partnership with a US engineering group would have no impact on the public sector finances.

Although the Department of Trade and Industry is understood to have approved BNFL's participation, the Treasury is understood to have held up the deal at the last minute because of worries about the liabilities the Government could be exposed to.

However, these relate in the main to steam generation contracts Westinghouse entered into in the late 1970s and early 1980s, and not to nuclear reprocessing and clean-up liabilities.

BNFL and its partner Morrison Knudsen are proposing to pay $265m (pounds 160m) to take over Westinghouse's nuclear interests and assume a further $700m to $800m in liabilities. BNFL would have a 40 per cent interest in the joint venture, but it would have management control and shoulder the lion's share of the liabilities.

If the deal is approved it would catapult BNFL into the leading position in the global nuclear industry. BNFL, which owns the Sellafield nuclear waste reprocessing plant in Cumbria, has already won $2.5bn worth of business in the United States through its BNFL Inc subsidiary to clean up former US weapons research sites in Washington state, Colorado, Tennessee and South Carolina.

But some UK government ministers are said to be concerned that it could prove the forerunner to the privatisation of BNFL. The state-owned group made pre-tax profits of pounds 216m in 1997 on turnover of pounds 1.26bn and paid pounds 46m in dividends to the Exchequer.

BNFL was formerly outside the Public Sector Borrowing Requirement. It was brought back within the PSBR four years ago, since when it has lobbied unsuccessfully to be removed from the public finances and given greater commercial freedom.