March 2000

BNFL unlikely to meet targets

Financial Times, 30 Mar 2000
By Matthew Jones and Andrew Taylor

[Posted 31/03/2000]

British Nuclear Fuels said on Thursday that it would try to persuade the government to lower the performance targets it must meet before ministers approve a partial sell-off of the company.

Hugh Collum, chairman, told the cross-party Trade and Industry Select Committee that progress against the six key targets had been poor, and that the company would struggle to meet any of them this year.

The admission came after Helen Liddell, energy minister, told the Commons on Wednesday that the partial privatisation could not now take place "before the latter part of 2002."

The plan would have involved the sale of up to 49 per cent of the company to the private sector before the next election and was expected to raise up to 1.5bn.

The targets, known as the "balanced scorecard", were agreed with the government last July. They focus on the company's environmental performance, health and safety, skill enhancement, development of the US business, liability management, financial performance and reduction of controllable costs.

Mr Collum, who joined the company in October, admitted that the group was behind in profitability terms and had only reduced controllable costs by 17 per cent against a target of 25 per cent by 2001.

The revelation follows publication in February of three reports by the UK's nuclear safety regulator which found "systematic management failures" in the company.

Mr Collum said: "There is no point in having in place criteria which we have no chance of meeting. We will be seeking to have another look at them at the end of the year."

However, the government is known to be surprised that the company came closest to meeting its environmental and health and safety targets. Ministers are expected to tighten rather than relax these criteria in the light of the regulator's reports.

The Department of Trade and Industry said: "The government is likely to wish to review targets to reflect BNFL's new corporate plan but any new targets will be rigorous and demanding."

Mr Collum welcomed the delay to the partial privatisation because it would allow BNFL to recover from a spate of incidents which had badly dented its credibility. He claimed a partial sale of the company would still be the best option to safeguard its future because it would allow better access to financial markets and make managers more accountable.

Meanwhile Mrs Liddell defended the government's decision to hand over management of the Atomic Weapons Establishment at Aldermaston to a consortium including BNFL, Lockheed Martin of the US and Serco the services group.

Mrs Liddell said the consortium's management and safety plans had been carefully reviewed and that BNFL's nuclear waste management business had no connections with recent Mox manufacturing quality control problems.

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