September 2002

Call to aid generator by ending nuclear contracts

Financial Times, September 04, 2002
By Andrew Taylor, Utilities Correspondent

Original address:

[Posted 06/09/2002]

The government should axe controversial nuclear fuel reprocessing contracts to ease financial pressures on British Energy, an environmental campaign group affiliated to the Labour party said yesterday.

Sera, which claims support from more than 100 Labour MPs including six cabinet ministers, wants Patricia Hewitt, the trade and industry secretary, to end a £300m a year fuel reprocessing contract between British Energy, the country's biggest nuclear generator, and the state-owned British Nuclear Fuels.

"Patricia Hewitt could take one simple step to put British Energy out of its financial misery - end its reprocessing contracts with BNFL," said Bill Eyres, Sera's chairman.

British Energy, which generates more than 20 per cent of the country's electricity, saw its share price halve last month after it revealed technical problems in cooling systems at two power stations. Concern has been expressed that the company could struggle to refinance more than ý200m of debt due to be repaid next year.

Low UK power prices would make it impossible to finance the construction of new atomic reactors to replace ageing nuclear power stations, all but one of which are due to close by 2023.

Switching to storing spent fuel, rather than reprocessing, would save British Energy ý200m-ý250m a year, said Sera. The campaign group supports early closure of nuclear reactors, which it says should be offset by renewable generation and lower demand through increased energy efficiency.

Sera said: "It is now clear British Energy will need help or eventually it will go bust. The government can, by ending BE's reprocessing obligation with BNFL, provide a substantial reduction in running costs, and benefit the environment."

It said the "fear of another Railtrack is a real one", and warned that although British Energy will not run out of cash in the short term, "it is inevitable in the medium term unless this issue is resolved".

Mr Eyres said: "The secretary of state, as sole shareholder of BNFL, can do this at the stroke of a pen. This move can be justified on environmental grounds. Part of the money saved could be used to meet the clean-up costs of redundant reactors."

Robin Jeffrey, British Energy's chief executive, has sought concessions from the government including re-negotiating the BNFL contract, which was negotiated before the company was privatised in 1996, reducing unfair local authority rates in line with other types of generators and exclusion for nuclear power from the climate change levy.

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