BNFL announces £1 bn loss as sale shelved

3 August 2003

The UK government has announced that it will not proceed with its planned part-privatisation of state-owned BNFL.

In a written statement to parliament last month, trade and industry secretary Patricia Hewitt said: "There have been significant developments in BNFL's key businesses, the nuclear industry and in the government's efforts to encourage a competitive clean-up market in the UK since 2001. On this basis, the government has decided that a partial privatisation of BNFL after the UK's Nuclear Decommissioning Authority has been formed should no longer be an option." She said that a joint review of BNFL's future strategy, to be conducted by the BNFL board and the government, would "evaluate options for alternative strategies. It will be conducted against the framework of the government's policy objectives set out in the white paper Managing the Nuclear Legacy ­ a Strategy for Action and in particular the need to develop a competitive market for nuclear site management which is fair and open." The review team has been asked to report this autumn.

The statement came on the same day that BNFL announced the appointment of former Dow Chemical head Michael Parker as its new chief executive. Hugh Collum, BNFL chairman, said: "I am very pleased to announce Michael's appointment. He has had a very successful career with the Dow Chemical Company." Parker took up his new post on 1 August. He left the US chemicals group last December, following two years' poor financial performance by Dow. Parker will be based at BNFL's new headquarters in Daresbury and he will also have an office in London. The new site at Daresbury is about 15km BNFL's Risley site, where the corporate centre of BNFL was previously based.

• BNFL reported a £1.088 billion pre-tax loss for the year to 31 March 2003. Of this, £827 million was for exceptional items, which included £415 million increase in the expected cost of decommissioning Hinkley Point A and Bradwell Magnox stations; £230 million impairment charge for assets at the Springfields site due to the contract renegotiation in connection with British Energy's solvent restructuring; and £175 million provisions against two nuclear clean-up contracts in the USA taken on several years ago at fixed prices.

Before exceptional items BNFL reported an operating loss of £190 million, compared to £68 million the previous year. According to Hugh Collum: "This is principally due to lower electricity prices, planned maintenance in Thorp and increased staffing at Sellafield to complete the recommendations of the Nuclear Installations Inspectorate's team inspection report." He added: "Despite this loss there was a cash inflow of £109 million which reflects better cash management that is embedded in the business." BNFL maintained a positive outlook for the future. Collum said: "The last year was certainly demanding for BNFL, but it was one in which further progress was made in laying the ground for the company's future development. We have maintained the momentum established in the past three years, completing a reorganisation that now aligns our worldwide business with its two customer groups ­ Nuclear Utilities and Governments." The company's focus, he said, will now be "on developing a strategy which will allow us to become a key player with a successful future in the nuclear industry and in particular the competitive clean-up market in the UK."



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