Analysis: UK warns Germany in nuclear fuel row

Britain has told Bonn that BNFL reprocessing contracts must be honoured or waste will be sent back

BRITAIN TOLD Germany last night that it would not back down in the nuclear fuel reprocessing row, warning that if Bonn reneged on pounds 1bn worth of contracts with BNFL it would have to pay compensation and take back the spent fuel.

Stephen Byers, Secretary of State for Trade and Industry, told the German environment minister, Jurgen Tritton, that the costs of Germany's decision to phase out overseas reprocessing of its nuclear fuel should not be borne by BNFL.

After the 30-minute meeting at the DTI headquarters, Mr Byers said the UK would not act as a "permanent storage depot" for nuclear waste and that the contracts with Germany would be decided under English law.

The German decision has cast doubt over the pounds 1.85bn Thorp reprocessing facility at BNFL's Sellafield plant, which employs 7,000, along with hopes of privatising the company.

Thorp opened in 1994 and has contracts to reprocess 11,200 tonnes of spent nuclear fuel up until 2014. So far about 1,700 tonnes has been reprocessed. It is one of only two such facilities, the other being Cogema's plant in north-west France.

Sellafield's reprocessing contracts with six German electricity companies account for about one-tenth of Thorp's pounds 12bn order book. The deal with the Germans involves reprocessing just under 1,000 tonnes of waste. So far 650 tonnes have been delivered to Sellafield by boat and train. Of this, about 150 tonnes has been reprocessed.

Thorp accounts for just over a third of BNFL's pounds 1.3bn turnover. Apart from Germany, it has long-term reprocessing contracts with British Energy and the Japanese. It also has a burgeoning nuclear clean-up and decommissioning business in the US worth around $9bn. It also generates income from the sale of electricity from its Magnox nuclear stations.

So were the Germans to renege on their contracts, it would be serious but not necessarily disastrous for BNFL. For the Germans, the repercussions could be much more severe.

Sir John Guinness, chairman of BNFL, says: "These are very robust and enforceable contracts. We would have no hesitation in seeking enforcement or full compensation through the courts if any of these contracts were not honoured in full."

But the Germans' troubles would not end there, for they would have a much more politically explosive problem to handle. The contracts would oblige them to take back the 500 tonnes of spent fuel yet to be treated, along with all the plutonium and high-level waste from the fuel that has been processed. "These deals are sale or return," as one adviser to BNFL put it.

Once spent fuel has arrived at Thorp it is separated into plutonium and uranium. The waste is broken down into three categories - high, intermediate and low level. The low-level waste is sent to the nearby Drigg facility, encased in concrete and covered over. The intermediate waste is being stored at Sellafield in liquid form in giant lagoons inside the complex following the failure to gain planning approval for a deep repository on site.

But the high-level waste, containing 99 per cent of the radioactivity from the spent fuel, goes back to the customer. In the case of the Germans, they would be hard pressed to store 500 tonnes of spent fuel and have no facilities at all to store plutonium or high-level waste.

Werner Hlubek, board member German nuclear generator RWE, says introducing a ban on overseas reprocessing within a year is not feasible. "It will take at least five or six years before the preconditions for a final change of policy can be created - that is, until the construction measures necessary to create decentralised interim storage facilities can be completed."

Added to this, the plutonium and highly-radioactive waste would have to be transported somehow across Germany - which is sure to prove a flashpoint. There have already been several violent confrontations between the German authorities and anti-nuclear protesters over shipments of spent fuel.

Environmental groups here, such as Friends of the Earth, believe Germany's decision to end overseas fuel reprocessing is a nail in the coffin for Thorp.

Dr Dominick Jenkins, FoE's nuclear campaigner, argues that Thorp has already become an expensive white elephant. None of the reprocessed plutonium or uranium has yet been supplied back to customers, while the failure to get permission for an intermediate waste repository at Sellafield wrecks what economic argument there was for reprocessing in the first place. He predicts Sellafield will become simply a storage facility for spent fuel, if the world's nuclear industry bothers to send it at all.

But BNFL says it has enough existing storage capacity for intermediate waste to last a very long time. It is also confident of getting final approval for its new pounds 300m Mixed Oxide Fuel (MOX) plant, which could produce operating profits of pounds 230m.

A wider question is what impact the German row will have on the Government's hopes of privatising BNFL, which could bring in up to pounds 3bn. City sources say the attitude in the Government and the Treasury towards a sell-off remains positive.

But FoE's Dr Jenkins maintains the City would drop BNFL "like a red-hot radioactive brick" because of its huge nuclear liabilities. BNFL has put aside pounds 10bn that it says will be enough to meet 75 per cent of future liabilities. But a report by Sussex University's Science Policy Research Unit puts BNFL's total liabilities at pounds 21bn to pounds 38.6bn.