Archived press release

No Economic Case for MOX Nuclear Plant

24 July 1999

Hell [1] will freeze over before British Nuclear Fuels makes a profit on its controversial plutonium (MOX) fuel plant, a report commissioned by Friends of the Earth reveals today[2]. The news comes on the day that further Government consultation on the economic case for the plant closes, and as BNFL are attempting the first test shipment by sea of MOX fuel to Japan. The likely scale of losses on the MOX plant, as revealed by FOE's report,would make the sale of BNFL shares recently announced by the Government unattractive to any intelligent investor.

The report was written by Mike Sadnicki and Fred Barker (both members of the Government's Radioactive Waste Management Advisory Committee) and Gordon MacKerron (Head of the Energy Programme at the Science Policy Research Unit,University of Sussex)[3]. FOE commissioned the report to analyse the additional economic information on BNFL's business case for the MOX plant, published on the instructions of Deputy Prime Minister John Prescott on 11th June. This is no less than the third public consultation on the MOX plant.

In June, Ministers said that they were minded to give the plant the go ahead, believing that the plant could make a profit of at least £100 million and pay for all its decommissioning and clean-up costs. FOE's new report shows that this is nonsense.

FOE's consultants replicated the methodology and economic model of BNFL's MOX business, as established by the PA Consulting Group, commissioned by the Environment Agency to assess the economic case for the plant. PA Group advised Government that BNFL would only need to secure contracts representing 30%-40% of its reference case (the amount of work that BNFL hopes to attract) to break even and pay all the plant's costs. So far contracts for only 6.7% of its reference case have been signed.

FOE's consultants analysed the price BNFL would have to charge for MOX fuel in order to secure additional contracts to either break even or make a profit. They found that.

. BNFL would have to charge very high prices of around £2000/kg MOX in order to break even at 30-40% of its reference case. However, as such prices are

significantly higher than the prices charged to German utilities by the French reprocessor, COGEMA, it is unlikely that BNFL's overseas customers would sign contracts on this basis.

. If BNFL sold MOX at a significantly lower price of around £750/kg MOX (similar to the level COGEMA charges the French nuclear company EdF) it could not even break even at 150% of its reference case.

. If BNFL were able to charge an average price of around £1250/kg MOX it would need to sign contracts for around 60% of the reference case to break even and 90%of the reference case to achieve a profit of over £100 million.

The consultants also carried out a risk analysis of the probability that BNFL would get additional contracts, break even or make a profit. Again they followed PA's methodology and found that:

. BNFL has only a 36% chance of breaking even with its MOX plant

. BNFL has only a 15% chance of making a profit of £100 million or more

. BNFL has only a 5% chance of making a profit of £230 million or more.

The difference between these results and those of PA and BNFL is so great that Ministers have no rational basis for sanctioning the full operation of the MOX plant.

Commenting, Dr Patrick Green, Friends of the Earth Senior Nuclear Campaigner, said:

“BNFL's economic case for the MOX plant is, frankly, a pile of irradiated codswallop. Our report shows that Ministers would need to be barking mad to give it the go ahead. Such a decision would be patently irrational, and therefore ripe for judicial review. If they make it they will be hearing from our lawyers. If BNFL really wants to be privatised it had better forget about MOX quick.”

NOTES TO EDITORS:

[2] Analysis of the Economic Case for the Sellafield MOX Plant, by Fred Barker, Mike Sadnicki and Gordon MacKerron, Friends of the Earth, July 1999.

[3] The authors of the report are writing in a personal capacity.

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Published by Friends of the Earth Trust