Nuclear clean-up arm set to go out to auction

The Government is planning to sell off the rump of the state- owned UK Atomic Energy Authority.

The auction of the nuclear decommissioning division of UKAEA, which will raise up to [pound]400m for Treasury coffers, will be hotly contested. US engineering giants such as CH2M Hill, Bechtel and Fluor, as well as UK services company Amec, are all likely to be interested as they seek a slice of the [pound]70bn nuclear clean-up market.

UKAEA, which employs 2,300 people, receives some [pound]300m a year from government body the Nuclear Decommissioning Authority (NDA) to clean up civil nuclear research sites such as Dounreay in Scotland. It also leads UK research into nuclear fusion and is involved in the international venture to build a [euro]4bn ([pound]2.7bn) test facility in France. This smaller division will remain in government hands.

It will be easier for the UKAEA arm to compete in the nuclear clean-up market under private ownership. The Government wants the bidding for contracts to be run on a commercial basis, and handing them to a state-owned body would leave officials open to potential conflicts of interest. UKAEA has already formed an alliance with CH2M Hill and Amec.

The Department for Business, Enterprise and Regulatory Reform (BERR), which has replaced the Department of Trade and Industry, will appoint a bank to run the sale early in the autumn. Initially, only a minority stake in the clean-up arm will be sold. The Government plans to sell the rest once the new five-year contract to decommission the Dounreay site is awarded in 2009.

The NDA, set up to introduce a competitive market for decommissioning two years ago, will put the contract for UKAEA's largest site out to tender for the first time next year. But as the incumbent operator, UKAEA hopes to beat other bidders for the work. The deal, which can be extended by a further five years, would be worth up to [pound]1.5bn and so would boost the UKAEA arm's value. Owning the division would also bring technical expertise, skilled people and knowledge of UK nuclear sites.

Norman Harrison, who was appointed chief executive of UKAEA in February, told The Independent on Sunday: "Our main stream of business going forward is decommissioning and environmental remediation. We have a business plan which is supported by BERR. We would ideally be looking in late autumn to go ahead with the part sale of the decommissioning business.

"If all goes to plan, the sale of a minority stake would be followed by a sale of the whole business once the Dounreay contract has been awarded, hopefully to us. The track record of the business speaks for itself. It would make bidding for future decommissioning contracts more straightforward. This is an exciting time for UKAEA."

As well as the Dounreay site, where the UK's experimental "fast breeder" reactors were built, UKAEA carries out decommissioning and environmental re-mediation work at Harwell in Oxfordshire, Windscale in Cumbria and Winfrith in Dorset.

Last year, UKAEA completed its decommissioning work 15 per cent, or [pound]44m, under budget, using the savings to accelerate other clean-up work. Previous chief executive Dipesh Shah explored the possibility of a part-privatisation of UKAEA but this was blocked by the Government.

Separately, BNFL will report annual results this weekfor the year to March. Profits have been boosted by a strong performance at the uranium-enrichment company Urenco, in which BNFL holds a one-third stake. Urenco reported earlier this year that pre-tax profits in 2006 were up over 15 per cent to [euro]353m.

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