Nuclear contracts to be scrutinised

THE GOVERNMENT wants legal scrutiny of contracts with overseas customers of Sellafield's new nuclear waste reprocessing plant.

The move indicates that the Government has yet to be convinced that the economic basis of these contracts is watertight, some 17 years after British Nuclear Fuels Limited (BNFL) signed the deals for its pounds 2.8bn Thermal Oxide Reprocessing Plant (Thorp) in Cumbria.

It is understood that the scrutineers are independent experts on international contract law. Their reading of the contracts will fuel a fierce debate in Whitehall over whether to grant BNFL permission to start up Thorp.

The first round of reprocessing contracts covers the initial 10 years of the plant's operation. These contracts must be secure if BNFL is to pay for Thorp's construction, and make a profit during this so- called 'baseload' period.

It is understood that opt-out clauses in contracts covering this period tie customers to severe penalty payments to BNFL. Contracts with foreign customers, which include German and Japanese electricity utilities, beyond this 10-year phase contain far less heavy penalty clauses.

The German utilities have indicated that they 'probably' will not fulfil this second round of contracts, choosing instead to compensate BNFL and bury their nuclear waste.

This would imperil the profitability of Thorp beyond its 10-year honeymoon phase. A BNFL analysis shows that the company believes it must maintain this second phase of contracts if it is to keep prices down for domestic customers. This can be done only 'by obtaining substantial overseas reprocessing business after the baseload period; at least 500 tonnes per year of overseas fuel is required', the document says.

Nuclear troubles, page 12