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BNFL:'Giant turkey' or business proposition? Semi privatisation beckons for BNFL as it seeks to be a world leader in nuclear reprocessing and decommissioning.

Last week Secretary of State for Trade & Industry Stephen Byers shocked the anti-nuclear lobby by announcing that he plans to introduce a public private partnership deal to nuclear clean-up and decommissioning company British Nuclear Fuels.

Under the deal the Government wants to sell up to 49% of BNFL to the private sector 'before the end of this Parliament', retaining the controlling share of the business.

Environmental campaign group Friends of the Earth led the cries of horror, warning that the initiative would be a 'giant turkey' for public and private sectors alike because of the huge risks involved in nuclear reprocessing and decommissioning.

FoE claims the cost of decommissioning the 11 Magnox reactors owned by BNFL could be a whopping £34.3bn (undiscounted), based on previous nuclear experience.

Raising such large sums of private money for such risky work could be extremely tricky. The ageing Magnox reactors had to be removed from electricity generator British Energy's books before it was privatised in 1996.

But the Department of Trade & Industry claims the real liability, on a discounted basis, is more like £10.1bn, and that 90% of this is already provided for in the accounts.

'The apparent risk to the private sector is less than might be expected,' says a spokesman.

The DTI commissioned consultant KPMG to do a feasibility study into the PPP. It found that there would be no shortage of private sector takers for BNFL, including its liabilities, so long as the risks and the regulatory environment were properly explained.

There is some precedent for this since nuclear power producer British Energy is already operating in the private sector, and funds its liabilities with a set-aside from its profits. Last year BNFL made a healthy pre-tax profit of £199M on a turnover of £2bn.

So if the business is so good, why does the Government want to sell off part of it?

It seems the main reason is not so much to transfer risk to the private sector, as to give BNFL more 'commercial freedom'.

According to KPMG, the need for the Government to approve these transactions 'has thrown into sharp relief how difficult it is for ministers and civil servants to judge major commercial contracts.'

The company has set its sights on becoming the world's top nuclear services company, but is still controlled by civil servants. Their grasp on the commercial realities of growing a business is not thought to be as strong as that of private sector entrepreneurs.

Growing BNFL will involve significant investment on top of the decommissioning work it needs to do. Expansion started last year through the acquisition of the US-based Westinghouse nuclear business.

The DTI believes a PPP deal will inject the entrepreneurial spirit needed to allow it to achieve its aims, while ensuring that civil servants, untainted by commercial considerations, maintain the focus on safety.

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