Archived press release

Taxpayer Worse Off After Nuclear Privatisation

10 June 1996

Privatisation of British Energy will be impossible if private investors have to pay the full nuclear waste clean-up cost associated with the Advanced Gas Cooled Reactors (AGR), Friends of the Earth said today as the Government published its Pathfinder Prospectus. Contrary to stated Government policy[1], a successful flotation will depend on tax payers subsidising the sale by covering costs that should be transferred to the private sector. As a result, the tax payer will be 1.2 billion worse off than if privatisation did not proceed [2].

Dr Patrick Green, Friends of the Earth's Senior Energy Campaigner said;

"The Government's nuclear con trick has been exposed. Privatisation represents a massive gift from the tax payer to private sector. This unacceptable exercise in nuclear bankruptcy is illegal under EC law and must be abandoned."[3]

A new independent financial analysis of British Energy finances, published today by Friends of the Earth and the Consortium of Opposing Local Authorities (COLA), reveals that once all expected operational costs AND all expected liabilities are taken into account, British Energy's seven AGR's are actually worthless, that is they have a Net Present Value (NPV) of almost zero. The NPV of the Sizewell B PWR is only 400 million. This is1.1 billion less than recent City estimates of likely privatisation proceeds.

Sale proceeds of the required level of magnitude can only be achieved if the Government exempt's private investors from around 6.9 billion(undiscounted) of AGR nuclear waste management costs, ie nearly 50 percent of total AGR liabilities.[4][5][6] The NPV of such costs is 2.8 billion.

If the Government receives 1.5 billion from the sale and 0.7 billion to cover British Energy debt, privatisation will therefore cost the tax payer 0.6 million more than it raises. However, as before privatisation, the taxpayers total holdings are worth plus 0.6 billion (400 NPV of sale assets and 200 start up contribution to the segregated fund), the tax payer will in total be1.2 billion worse off. The costs to the tax payer will be higher if British Energy's debt is reduced by the Government to further sweeten the sale. ENDS

NOTES TO EDITORS:

[1] T Eggar, Minster for Industry and Energy , Hansard 26 March 1996, Column 850

[2] Nuclear Privatisation: Liabilities Left in the State Sector, by Mike Sadnicki, Operational Research Consultant, 5 June 1996. Commissioned by the Consortium of Opposing Local Authorities and Friends of the Earth

[3] The European Commission has confirmed to Friends of the Earth and the Consortium of Opposing Local Authorities that it is investigating the Government's possible State Aid of the proposed privatisation.

[4] Undiscounted AGR and PWR liabilities total 14.6 billion. Of these 4.8 billion can be expected to be covered by operational charges and 2.9 by the British Energy segregated fund. The 6.9 billion of exemptions includes:

1.7 billion of operational costs (ie pre shut down reprocessing);

3.6 billion post shut down costs from AGR reprocessing (especially final cores), AGR Stage 1 decommissioning, AGR intermediate and high level waste (ILW and HLW) management costs and decommissioning of AGR-related facilities at BNFL;

1.6 billion stage III decommissioning costs due to possible lower than anticipated performance in the AGR segregated fund. Government figures have assumed 3.5 per cent growth until 2130. It would be more prudent to assume 2 per cent growth for such a fund beyond 30 years.

[5] The exemptions arise because British Energy segregated fund payments have been set at too low a level to meet all nuclear waste management and decommissioning costs as they fall due. Earlier research by Mike Sadnicki has suggested that the segregated fund payments should be increased to between 127 million and 208 million per year to ensure that British Energy can met all its liabilities.

[6] These liabilities would fall to the public sector. The total undiscounted liabilities in the public sector would be 15.5 billion Magnox plus the 6.9 billion AGR, totalling 22.5 billion.

[7] The Sadnicki study further reveals that only 5 billion of reserved cash is available to met Magnox liabilities, plus the Government undertaking that it will met up to a further 3.8 billion of Magnox liabilities when the reserved cash runs out. This leaves a shortfall of 6.7 billion.

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Published by Friends of the Earth Trust