What's happened to BNFL?
Nuclear Engineering International
27 July 2005
Announcing its annual results to 31 March 2005, BNFL has set out its strategy for the future – a strategy that includes the sale of Westinghouse.
As BNFL announced improved financial performance in its 2005 annual results, the UK government-owned nuclear business also confirmed it has commenced a sales process for its Westinghouse business unit. At the same time, BNFL has undergone major restructuring to prepare for the transfer of its assets and liabilities to the Nuclear Decommissioning Authority (NDA).
Ending months of speculation, BNFL CEO Mike Parker said: “There have been a number of unsolicited approaches for Westinghouse and it was decided at the board meeting on 30 June to commence a sales process to determine whether a disposal would realise appropriate value.”
STRATEGY U-TURN
The decision to commence the process of selling Westinghouse is clearly a major turning point in BNFL’s history. More precisely, it is the result of a U-turn in UK government policy, made around two years ago, when it was announced that there would be no public private partnership (PPP) of BNFL. In addition, the government also announced it would conduct a strategy review with the new CEO and his management team. Parker joined BNFL in August 2003 and the review was completed by the end of that year.
The conclusions of the strategy review set in motion the complete overhaul of the company. Firstly, Parker told NEI, the company was to primarily focus on working with the government towards the creation of the NDA, which commenced full operation on 1 April this year. “At the same time as that, we would transition our operations in the UK away from an owner/operator cultural mindset and into one of a manager and operator of assets and sites.” This move towards becoming a contractor resulted in the creation of British Nuclear Group (BNG), which was officially launched in May 2004.
Alongside the decision to work towards the creation of a nuclear clean-up marketplace, the other businesses of BNFL – and, in particular, Westinghouse – were to be managed to “deliver value and control risks to the UK tax payer,” according to group chairman Gordon Campbell. The sale of Westinghouse, he said, would be in line with this.
A GOOD YEAR
Essentially, BNFL is now a holding company – though Parker prefers to use the somewhat toe-curling term ‘strategic architect’ – with three main business groups: Westinghouse, BNG (which now incorporates Spent Fuel Services and BNG America, formerly known as BNFL Inc) and Nexia Solutions.
The group’s loss before interest, tax and exceptionals for the year to 31 March 2005 – the day before NDA entered full operation – was $144 million ($256 million), almost half of the loss made in the previous year. Exceptional charges were £243 million ($433 million), primarily comprising of: £94 million for restructuring provisions mainly for BNG; plus £132 million for the closing out of two fixed price legacy contracts with the US Department of Energy (DoE).
But behind the overall loss, there are some strong businesses with healthy balance sheets. Before interest, taxation and exceptional items, these businesses generated a reasonable profit for the group: Westinghouse – £41 million ($73 million); BNG – £101 million ($180 million), plus a further £18 million ($32 million) from the Spent Fuel Services division; and Nexia Solutions – £6 million ($11 million).
However, this income was more than offset by the loss made by the group’s shadow division called ALFA – effectively an ‘internal NDA’, which held the assets, liabilities and activities that were to be transferred to the NDA. During the year to 31 March 2005, ALFA generated an operating loss of £312 million ($556 million), down from a £532 loss the previous year. The Magnox electricity generating business continued to have accounting losses of the order of £150 million ($260 million) and the division has also borne the major part of pension deficit repairs and IT upgrade costs.
The plan was to transfer the activities of ALFA to the NDA on 1 April 2005, leaving BNFL with a portfolio of profit-making businesses. However, for the time being BNFL’s £40 billion ($70 billion) worth of undiscounted liabilities remain on its balance sheet, pending the outcome of a state aid investigation by the European Commission. The investigation commenced last December and is expected to take around 12-18 months. Meanwhile, the assets, including the contracts, were transferred to the NDA on 1 April.
WESTINGHOUSE FOR SALE
BNFL planned to issue a sales memorandum for Westinghouse around the end of July. Parker told NEI he expected it to take around six months before BNFL would decide whether there is a viable proposal. Should the sale go ahead, it would probably take a further year to complete. There is clearly a great deal of interest in the business: according to Parker, over the last 18 months, BNFL had received around 15 serious expressions of interest regarding Westinghouse.
Parker noted that the business is well-placed for an anticipated revival of nuclear power. In particular, its AP1000 design, which has received final design approval by the US Nuclear Regulatory Commission (NRC), is a strong contender for the contract for four Generation III units at two sites in China. And in the USA, Westinghouse is a member of the NuStart consortium, which is putting the AP1000 through the NRC’s process to obtain a combined construction and operating licence. “Westinghouse is a very successful operation in its own right,” said Parker, adding: “As a mature and a semi-autonomous business, Westinghouse is a prime asset that has all the skills to prosper in the private sector.”
Parker told NEI: “Looking at this from an overall point of view, recognising our focus is on the UK – whereas most of the opportunity for Westinghouse in the short- to medium-term is not in the UK – we felt the combination of that reality married with lots of the expressions of interest that we’ve had” led the board to conclude that “we should start a sales process that will allow us to determine whether a disposal will realise appropriate value.”
Another reason for the sale of Westinghouse – which has not been mentioned by BNFL – was put forward by Malcolm Wicks, the UK’s new minister of state for energy, at the Fuel for Thought nuclear congress, held in Newport, Wales on 6-7 July. He argued that, should the UK government – the sole shareholder of BNFL – own a reactor vendor, then this could call into question any possible new reactor orders in the UK. That this sales process should lead to a nuclear revival in the UK is not only paradoxical, such an argument would indicate there would be government involvement in a new nuclear build – something it has ruled out.
In contrast to BNFL’s opinion that the sale would deliver value to the UK taxpayer, Prospect, the UK’s largest engineers’ union, has argued the opposite case. Dai Hudd, Prospect assistant general secretary, said: “We will lose at least £8-9 billion in potential contracts for China and the rest of Asia, which are now likely to go to America. The trade and industry select committee should launch an immediate enquiry into a decision which is so obviously against the national interest.” He added: “What the staff of BNFL want to know is what has happened to change the economic and technical arguments that persuaded the government to back BNFL’s purchase of Westinghouse in 1999.”
The union fears that jobs at the Springfields site – where Westinghouse has 1400 employees – would be put at risk. Prospect national secretary for the northwest, Mike Graham, said: “Assuming an American buyer takes possession of Westinghouse, which has its own fuel production facilities in the US, they may view Springfields as being surplus to requirements and ripe for asset stripping.” He added: “Nothing has changed except that nuclear new build is now top of the agenda for fighting carbon emissions. Westinghouse would provide the UK with a golden opportunity to grab market share and earn a huge return for the British taxpayer. Instead that long-term vision has been sacrificed to make a quick buck for the Treasury.”
FUTURE PROSPECTS
Given BNFL’s reasoning for the sale of Westinghouse, surely it should follow that it is looking to dispose of other interests? In fact, at the end of June, the Telegraph newspaper reported that the UK government had planned to privatise Urenco, but was blocked by the Dutch and German governments, the two other shareholders in the company. Asked whether BNFL intends to sell its one-third share in Urenco, Parker said there were no plans right now for a sale. He pointed to two major projects that Urenco is currently involved in: one to form a 50:50 joint venture with Areva, and the other being the Louisiana Energy Services project to build the National Enrichment Facility in New Mexico, USA. “These are very significant projects for which we, BNFL, and the other shareholders are fully supportive of following at this juncture.” He went on to say: “There’s a common agreement about running Urenco but there isn’t any agreement with regards to a sale of Urenco.”
On the 22.5% share held by BNFL in South Africa’s PBMR company, Parker said: “PBMR is a relatively small investment. It’s important from a South African point of view and from a technology point of view. We are very committed to continuing to work with our South African partners on that, and whatever’s happening here to Westinghouse, we won’t change that commitment.”
Although BNFL is not saying anything further on this, it would make sense for the PBMR stake to be transferred to Westinghouse, so that it would then pass on to a potential buyer of Westinghouse. One reason concerns the involvement Westinghouse has in the South African project along with its intention to submit a bid to build a PBMR as part of the proposed Next Generation Nuclear Plant project at Idaho National Laboratory in the USA. Furthermore, as noted above, it could well be the case that the UK government feels uncomfortable owning a stake in new reactor technology.
For its other main businesses – BNG and Nexia Solutions – Parker suggested that the way forward in the more immediate future was for the group to enter into partnerships.
For the time being, there is still work to do in making Nexia Solutions “more streamlined, which it’s been doing, and more commercial, more outside-in focused,” he said. “At the same time we need to maintain the nuclear science and technology intellect within that entity in order to help to keep the nuclear option open here in the UK.” While this would suggest a sale of Nexia Solutions is also unlikely, Parker envisaged the business “potentially working with other entities” towards becoming “more of a national laboratory type of concept.”
BRITISH NUCLEAR GROUP
This leaves BNG, which carries out decommissioning and clean-up operations at the former BNFL sites, manages the four currently operating Magnox reactor stations and – through the Spent Fuel Services division – operates facilities such as Thorp that have now been transferred to the NDA. (The one exception is that Westinghouse is contracted to run the Springfields fuel manufacturing site.)
These incumbent contracts with the NDA account for some 80% of the annual £2.1 billion ($3.7 billion) or so that the NDA is spending on site operations and clean-up. At this stage, it would therefore make little sense to dispose of BNG, particularly at a time when BNFL is focusing on developing the nuclear clean-up marketplace. Parker said that BNFL had received no enquiries regarding a possible sale of BNG. His interpretation of reports about a proposal by AMEC to acquire BNG was that the company wanted to declare its interest, should a sale of BNG be considered sometime in the future. While not ruling out a sale of the business in the longer term, Parker said that the current strategy was to turn it into the NDA’s ‘contractor of choice’.
In about two years’ time, the NDA plans to open up the clean-up contracts to competitive tender. Parker told NEI that BNG intends to win those contracts by entering into partnerships with other companies. In the short term, BNG will “get to know some of these companies better.” This is already the case at Sellafield, where a tier 2 agreement has been entered into with Fluor. Parker said the group is currently looking into the possibility of forming a similar arrangement at reactor sites. “The team’s idea is that we move on with partnering and that’s the tactic – because we have to win the contracts.”
Assuming the NDA doesn’t decide to close the Thorp plant, or anything else equally drastic, BNG is currently in an enviable position as the incumbent contractor. As such, the level of risk for the business has plummeted since the NDA inherited its assets and contracts. Parker confirmed that BNFL is no longer liable for any contract: should, for example, a reprocessing contract not be fulfilled (perhaps as a result of the premature closure of Thorp) then the NDA would be liable for that contract.
Leaving aside the slight possibility that the planned closure of Thorp in about five or six years’ time could be affected by the pipe failure incident, the outlook for the Sellafield MOX Plant (SMP) has improved. The first part of a contract with Nordostschweizerische Kraftwerke (NOK) was completed in May, with the delivery of four MOX fuel assemblies to its Beznau 1 reactor in Switzerland. SMP has now begun to fabricate a second batch for NOK.
Referring to SMP, Parker said: “Clearly, we have been struggling to commission SMP. We made a lot of progress in the last six months of last year, which allowed us to produce these four MOX fuel assemblies. We have set ourselves improving targets here as we move forward with the commissioning of this facility. And we expect to make a lot of progress over the next two or three years.” In this current fiscal year, BNG aims to manufacture 12 assemblies at SMP.
Credit: BNFL
The Sellafield site in Cumbria, which transferred from BNFL to the NDA on 1 April 2005
WELL PLACED FOR NEW BUILD?
Since Parker joined BNFL two years ago, the group has gone through a period of considerable change – more so than at any other time during its 34-year history. Though BNFL is still working on streamlining its businesses still further, it has essentially completed its internal restructuring process. Parker stated: “As the high level restructuring of the company nears completion we now have to concentrate on our businesses, making them tangible and demonstrable successes that are able to maximise shareholder value.”
It is worth bearing in mind that the UK government, BNFL’s shareholder, seems to be both risk averse and eager to divest itself of its nuclear fuel cycle interests. Following a low-risk strategy while maximising shareholder value will clearly have implications for the way in which BNFL’s subsidiaries continue to do business.
This was highlighted earlier this year, following the closure of what BNFL refers to its legacy contracts with the DoE. In the 1990s, BNFL Inc – BNFL’s clean-up division in the USA – took on two major fixed price contracts covering the East Tennessee Technology Park (ETTP) project at Oak Ridge and the Advanced Mixed Waste Treatment Plant (AMWTP) at Idaho. Though the work carried out was highly successful, the division came unstuck financially. Now, with the closure of these contracts, BNFL Inc has been incorporated into BNG under the name BNG America and has adopted a much more low-risk strategy. Such an approach involves focusing on fee-at-risk and performance-based contracts, as well as pursuing partnership arrangements with other clean-up companies.
While BNFL’s strategy and focus may be in line with the shareholder’s wishes, it isn’t in line with preparing the group for leading a future new nuclear build programme in the UK. In fact, the 2003 BNFL strategy review followed hot on the heels of the government’s energy white paper, which sidelined new nuclear in favour of achieving massive carbon emissions reductions through renewables and energy savings. And the energy white paper came soon after the 2002 white paper, titled Managing the Nuclear Legacy, which placed great emphasis on dealing with the country’s radioactive waste. So the government has been consistent with its nuclear strategy, and it would be a considerable reversal of its policy to directly support new nuclear build.
Despite this, Campbell has a more optimistic take on the outlook, stating: “Old prejudices about the cost of nuclear power, the handling of waste and safety concerns need to be reviewed objectively and set against the world’s desire to reduce carbon dioxide emissions. The outcome must surely be a return to building nuclear power generators from which the businesses of BNFL, with its massive expertise, can only benefit.”
Anyone care to take bets?
27 July 2005
Announcing its annual results to 31 March 2005, BNFL has set out its strategy for the future – a strategy that includes the sale of Westinghouse.
As BNFL announced improved financial performance in its 2005 annual results, the UK government-owned nuclear business also confirmed it has commenced a sales process for its Westinghouse business unit. At the same time, BNFL has undergone major restructuring to prepare for the transfer of its assets and liabilities to the Nuclear Decommissioning Authority (NDA).
Ending months of speculation, BNFL CEO Mike Parker said: “There have been a number of unsolicited approaches for Westinghouse and it was decided at the board meeting on 30 June to commence a sales process to determine whether a disposal would realise appropriate value.”
STRATEGY U-TURN
The decision to commence the process of selling Westinghouse is clearly a major turning point in BNFL’s history. More precisely, it is the result of a U-turn in UK government policy, made around two years ago, when it was announced that there would be no public private partnership (PPP) of BNFL. In addition, the government also announced it would conduct a strategy review with the new CEO and his management team. Parker joined BNFL in August 2003 and the review was completed by the end of that year.
The conclusions of the strategy review set in motion the complete overhaul of the company. Firstly, Parker told NEI, the company was to primarily focus on working with the government towards the creation of the NDA, which commenced full operation on 1 April this year. “At the same time as that, we would transition our operations in the UK away from an owner/operator cultural mindset and into one of a manager and operator of assets and sites.” This move towards becoming a contractor resulted in the creation of British Nuclear Group (BNG), which was officially launched in May 2004.
Alongside the decision to work towards the creation of a nuclear clean-up marketplace, the other businesses of BNFL – and, in particular, Westinghouse – were to be managed to “deliver value and control risks to the UK tax payer,” according to group chairman Gordon Campbell. The sale of Westinghouse, he said, would be in line with this.
A GOOD YEAR
Essentially, BNFL is now a holding company – though Parker prefers to use the somewhat toe-curling term ‘strategic architect’ – with three main business groups: Westinghouse, BNG (which now incorporates Spent Fuel Services and BNG America, formerly known as BNFL Inc) and Nexia Solutions.
The group’s loss before interest, tax and exceptionals for the year to 31 March 2005 – the day before NDA entered full operation – was $144 million ($256 million), almost half of the loss made in the previous year. Exceptional charges were £243 million ($433 million), primarily comprising of: £94 million for restructuring provisions mainly for BNG; plus £132 million for the closing out of two fixed price legacy contracts with the US Department of Energy (DoE).
But behind the overall loss, there are some strong businesses with healthy balance sheets. Before interest, taxation and exceptional items, these businesses generated a reasonable profit for the group: Westinghouse – £41 million ($73 million); BNG – £101 million ($180 million), plus a further £18 million ($32 million) from the Spent Fuel Services division; and Nexia Solutions – £6 million ($11 million).
However, this income was more than offset by the loss made by the group’s shadow division called ALFA – effectively an ‘internal NDA’, which held the assets, liabilities and activities that were to be transferred to the NDA. During the year to 31 March 2005, ALFA generated an operating loss of £312 million ($556 million), down from a £532 loss the previous year. The Magnox electricity generating business continued to have accounting losses of the order of £150 million ($260 million) and the division has also borne the major part of pension deficit repairs and IT upgrade costs.
The plan was to transfer the activities of ALFA to the NDA on 1 April 2005, leaving BNFL with a portfolio of profit-making businesses. However, for the time being BNFL’s £40 billion ($70 billion) worth of undiscounted liabilities remain on its balance sheet, pending the outcome of a state aid investigation by the European Commission. The investigation commenced last December and is expected to take around 12-18 months. Meanwhile, the assets, including the contracts, were transferred to the NDA on 1 April.
WESTINGHOUSE FOR SALE
BNFL planned to issue a sales memorandum for Westinghouse around the end of July. Parker told NEI he expected it to take around six months before BNFL would decide whether there is a viable proposal. Should the sale go ahead, it would probably take a further year to complete. There is clearly a great deal of interest in the business: according to Parker, over the last 18 months, BNFL had received around 15 serious expressions of interest regarding Westinghouse.
Parker noted that the business is well-placed for an anticipated revival of nuclear power. In particular, its AP1000 design, which has received final design approval by the US Nuclear Regulatory Commission (NRC), is a strong contender for the contract for four Generation III units at two sites in China. And in the USA, Westinghouse is a member of the NuStart consortium, which is putting the AP1000 through the NRC’s process to obtain a combined construction and operating licence. “Westinghouse is a very successful operation in its own right,” said Parker, adding: “As a mature and a semi-autonomous business, Westinghouse is a prime asset that has all the skills to prosper in the private sector.”
Parker told NEI: “Looking at this from an overall point of view, recognising our focus is on the UK – whereas most of the opportunity for Westinghouse in the short- to medium-term is not in the UK – we felt the combination of that reality married with lots of the expressions of interest that we’ve had” led the board to conclude that “we should start a sales process that will allow us to determine whether a disposal will realise appropriate value.”
Another reason for the sale of Westinghouse – which has not been mentioned by BNFL – was put forward by Malcolm Wicks, the UK’s new minister of state for energy, at the Fuel for Thought nuclear congress, held in Newport, Wales on 6-7 July. He argued that, should the UK government – the sole shareholder of BNFL – own a reactor vendor, then this could call into question any possible new reactor orders in the UK. That this sales process should lead to a nuclear revival in the UK is not only paradoxical, such an argument would indicate there would be government involvement in a new nuclear build – something it has ruled out.
In contrast to BNFL’s opinion that the sale would deliver value to the UK taxpayer, Prospect, the UK’s largest engineers’ union, has argued the opposite case. Dai Hudd, Prospect assistant general secretary, said: “We will lose at least £8-9 billion in potential contracts for China and the rest of Asia, which are now likely to go to America. The trade and industry select committee should launch an immediate enquiry into a decision which is so obviously against the national interest.” He added: “What the staff of BNFL want to know is what has happened to change the economic and technical arguments that persuaded the government to back BNFL’s purchase of Westinghouse in 1999.”
The union fears that jobs at the Springfields site – where Westinghouse has 1400 employees – would be put at risk. Prospect national secretary for the northwest, Mike Graham, said: “Assuming an American buyer takes possession of Westinghouse, which has its own fuel production facilities in the US, they may view Springfields as being surplus to requirements and ripe for asset stripping.” He added: “Nothing has changed except that nuclear new build is now top of the agenda for fighting carbon emissions. Westinghouse would provide the UK with a golden opportunity to grab market share and earn a huge return for the British taxpayer. Instead that long-term vision has been sacrificed to make a quick buck for the Treasury.”
FUTURE PROSPECTS
Given BNFL’s reasoning for the sale of Westinghouse, surely it should follow that it is looking to dispose of other interests? In fact, at the end of June, the Telegraph newspaper reported that the UK government had planned to privatise Urenco, but was blocked by the Dutch and German governments, the two other shareholders in the company. Asked whether BNFL intends to sell its one-third share in Urenco, Parker said there were no plans right now for a sale. He pointed to two major projects that Urenco is currently involved in: one to form a 50:50 joint venture with Areva, and the other being the Louisiana Energy Services project to build the National Enrichment Facility in New Mexico, USA. “These are very significant projects for which we, BNFL, and the other shareholders are fully supportive of following at this juncture.” He went on to say: “There’s a common agreement about running Urenco but there isn’t any agreement with regards to a sale of Urenco.”
On the 22.5% share held by BNFL in South Africa’s PBMR company, Parker said: “PBMR is a relatively small investment. It’s important from a South African point of view and from a technology point of view. We are very committed to continuing to work with our South African partners on that, and whatever’s happening here to Westinghouse, we won’t change that commitment.”
Although BNFL is not saying anything further on this, it would make sense for the PBMR stake to be transferred to Westinghouse, so that it would then pass on to a potential buyer of Westinghouse. One reason concerns the involvement Westinghouse has in the South African project along with its intention to submit a bid to build a PBMR as part of the proposed Next Generation Nuclear Plant project at Idaho National Laboratory in the USA. Furthermore, as noted above, it could well be the case that the UK government feels uncomfortable owning a stake in new reactor technology.
For its other main businesses – BNG and Nexia Solutions – Parker suggested that the way forward in the more immediate future was for the group to enter into partnerships.
For the time being, there is still work to do in making Nexia Solutions “more streamlined, which it’s been doing, and more commercial, more outside-in focused,” he said. “At the same time we need to maintain the nuclear science and technology intellect within that entity in order to help to keep the nuclear option open here in the UK.” While this would suggest a sale of Nexia Solutions is also unlikely, Parker envisaged the business “potentially working with other entities” towards becoming “more of a national laboratory type of concept.”
BRITISH NUCLEAR GROUP
This leaves BNG, which carries out decommissioning and clean-up operations at the former BNFL sites, manages the four currently operating Magnox reactor stations and – through the Spent Fuel Services division – operates facilities such as Thorp that have now been transferred to the NDA. (The one exception is that Westinghouse is contracted to run the Springfields fuel manufacturing site.)
These incumbent contracts with the NDA account for some 80% of the annual £2.1 billion ($3.7 billion) or so that the NDA is spending on site operations and clean-up. At this stage, it would therefore make little sense to dispose of BNG, particularly at a time when BNFL is focusing on developing the nuclear clean-up marketplace. Parker said that BNFL had received no enquiries regarding a possible sale of BNG. His interpretation of reports about a proposal by AMEC to acquire BNG was that the company wanted to declare its interest, should a sale of BNG be considered sometime in the future. While not ruling out a sale of the business in the longer term, Parker said that the current strategy was to turn it into the NDA’s ‘contractor of choice’.
In about two years’ time, the NDA plans to open up the clean-up contracts to competitive tender. Parker told NEI that BNG intends to win those contracts by entering into partnerships with other companies. In the short term, BNG will “get to know some of these companies better.” This is already the case at Sellafield, where a tier 2 agreement has been entered into with Fluor. Parker said the group is currently looking into the possibility of forming a similar arrangement at reactor sites. “The team’s idea is that we move on with partnering and that’s the tactic – because we have to win the contracts.”
Assuming the NDA doesn’t decide to close the Thorp plant, or anything else equally drastic, BNG is currently in an enviable position as the incumbent contractor. As such, the level of risk for the business has plummeted since the NDA inherited its assets and contracts. Parker confirmed that BNFL is no longer liable for any contract: should, for example, a reprocessing contract not be fulfilled (perhaps as a result of the premature closure of Thorp) then the NDA would be liable for that contract.
Leaving aside the slight possibility that the planned closure of Thorp in about five or six years’ time could be affected by the pipe failure incident, the outlook for the Sellafield MOX Plant (SMP) has improved. The first part of a contract with Nordostschweizerische Kraftwerke (NOK) was completed in May, with the delivery of four MOX fuel assemblies to its Beznau 1 reactor in Switzerland. SMP has now begun to fabricate a second batch for NOK.
Referring to SMP, Parker said: “Clearly, we have been struggling to commission SMP. We made a lot of progress in the last six months of last year, which allowed us to produce these four MOX fuel assemblies. We have set ourselves improving targets here as we move forward with the commissioning of this facility. And we expect to make a lot of progress over the next two or three years.” In this current fiscal year, BNG aims to manufacture 12 assemblies at SMP.
Credit: BNFL
The Sellafield site in Cumbria, which transferred from BNFL to the NDA on 1 April 2005
WELL PLACED FOR NEW BUILD?
Since Parker joined BNFL two years ago, the group has gone through a period of considerable change – more so than at any other time during its 34-year history. Though BNFL is still working on streamlining its businesses still further, it has essentially completed its internal restructuring process. Parker stated: “As the high level restructuring of the company nears completion we now have to concentrate on our businesses, making them tangible and demonstrable successes that are able to maximise shareholder value.”
It is worth bearing in mind that the UK government, BNFL’s shareholder, seems to be both risk averse and eager to divest itself of its nuclear fuel cycle interests. Following a low-risk strategy while maximising shareholder value will clearly have implications for the way in which BNFL’s subsidiaries continue to do business.
This was highlighted earlier this year, following the closure of what BNFL refers to its legacy contracts with the DoE. In the 1990s, BNFL Inc – BNFL’s clean-up division in the USA – took on two major fixed price contracts covering the East Tennessee Technology Park (ETTP) project at Oak Ridge and the Advanced Mixed Waste Treatment Plant (AMWTP) at Idaho. Though the work carried out was highly successful, the division came unstuck financially. Now, with the closure of these contracts, BNFL Inc has been incorporated into BNG under the name BNG America and has adopted a much more low-risk strategy. Such an approach involves focusing on fee-at-risk and performance-based contracts, as well as pursuing partnership arrangements with other clean-up companies.
While BNFL’s strategy and focus may be in line with the shareholder’s wishes, it isn’t in line with preparing the group for leading a future new nuclear build programme in the UK. In fact, the 2003 BNFL strategy review followed hot on the heels of the government’s energy white paper, which sidelined new nuclear in favour of achieving massive carbon emissions reductions through renewables and energy savings. And the energy white paper came soon after the 2002 white paper, titled Managing the Nuclear Legacy, which placed great emphasis on dealing with the country’s radioactive waste. So the government has been consistent with its nuclear strategy, and it would be a considerable reversal of its policy to directly support new nuclear build.
Despite this, Campbell has a more optimistic take on the outlook, stating: “Old prejudices about the cost of nuclear power, the handling of waste and safety concerns need to be reviewed objectively and set against the world’s desire to reduce carbon dioxide emissions. The outcome must surely be a return to building nuclear power generators from which the businesses of BNFL, with its massive expertise, can only benefit.”
Anyone care to take bets?
posted by Marcel at 5:13 PM
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