Outlook: Forget the Post Office, BNFL Looks Like Being the First to Be Put on the Privatisation Block
May 21 - Independent, The; London (UK)
London (UK)
At the time, it was a pretty strange old deal. There was obviously some industrial logic in BNFL buying Westinghouse of the US, for together, the two became the biggest nuclear reprocessing operators in the world, with top notch expertise in nuclear design and clean-up to boot. Yet BNFL was a state-owned company controlled by a Labour government which back then (1998) was committed to a steady decommissioning of what remained of Britain's nuclear power industry. The only way the $1.2bn (pounds 658m) acquisition could be explained at all was as a way of dressing up BNFL for eventual privatisation.
Seven years on, and it appears that privatisation is back on the agenda, at
least in so far as the Westinghouse bit of BNFL is concerned. Indeed it might
even be possible now to sell the whole thing, as ownership of Sellafield and the
ageing Magnox nuclear power stations, together with their decommissioning
liabilities, has been transferred into a separate government agency. This leaves
BNFL with just the management contract for operating these plants, plus the
prospect of lucrative clean-up contracts when the decommissioning begins. The
problem of what to do with the nuclear waste stacking up in containers at
Sellafield is one for another part of government.
So the liabilities are ringed fenced, but what makes Westinghouse and
possibly the rest of BNFL suddenly attractive to private investors? The answer
is that nuclear has become respectable again. Even Labour is being forced to
reconsider the option of new nuclear build, partly for reasons of security of
supply as other sources of energy become scarcer and more expensive, and partly
because it offers a partial solution to meeting greenhouse gas emission targets.
Westinghouse is one of only four companies worldwide with a credible design
for new nuclear build, the AP1000, which it is already hoping to sell in
substantial quantity to China and India. Any business it can pick up in Britain
would be icing of the cake. The Government needs the money a lot more than it
did back in 1998, so it is keener than ever to sell.
Furthermore, should the Government decide to give the go-ahead to a new
generation of nuclear power stations, it would probably be wise not to tie
itself exclusively into the Westinghouse design. All other things being equal,
it might be better, for diplomatic reasons if no other, to go for the rival
French system, which would in any case help secure a lot more European jobs.
It's early days and it may not happen, but it makes eminent sense to sell. The
oddity was buying the business out of taxpayers' money in the first place.