Labour condemns nuclear sale as 'privatisation too far'

Labour yesterday called on the Government to abandon nuclear privatisation following the disclosure that proceeds from the sale may not cover the costs of cleaning up the older Magnox reactors that are being kept in public ownership.

Margaret Beckett, shadow trade and industry secretary, wrote to Ian Lang, President of the Board of Trade, demanding that the flotation of British Energy be called off "for the sake of future taxpayers".

Labour's demand came as it emerged that the sell-off, scheduled for July, may raise only pounds 1.5bn-pounds 2bn compared with the Government's original forecast of up to pounds 2.8bn.

The privatisation of British Energy's eight modern PWR and AGR reactors has to net at least pounds 2.6bn to cover the shortfall in funds needed to decommission and clean up the ageing Magnox stations.

Mrs Beckett said: "The Government's arithmetic is looking increasing dodgy. First they said they needed to raise pounds 2.6bn, now they admit they must underwrite Magnox stations to the tune of pounds 3.8bn but the sale proceeds may be as low as pounds 1.5bn.

"This is a privatisation too far and it is becoming increasingly clear that it is at the expense of the future taxpayer. It is outrageous that just when the public were starting to see a return on their investment in nuclear power the profits are being privatised."

Government sources accepted that the proceeds from the flotation may be nearer the bottom end of the pounds 1.5bn-pounds 2bn range now expected by ABN Amro Hoare Govett, brokers to British Energy.

But they insisted that together with the pounds 600m of debt being left in British Energy total proceeds would be significantly higher. Labour's demand for the sale to be called off was dismissed as "the usual posturing".

The Government White Paper, published a year ago setting out plans for the privatisation, said: "The Government is satisfied that sufficient funds have, or will in future be generated by the Magnox stations and realised by the privatisation of the AGR and PWR stations to meet the cost of the liabilities which remain the responsibility of the public sector."

Since then it has wiped pounds 1bn off the debt of British Energy, written the assets down by pounds 3bn to pounds 5bn and provided a pounds 230m dowry from the taxpayer to help meet the costs of decommissioning its eight reactors. The row over the valuation comes just days before the Government launches the pounds 5m marketing campaign for British Energy. It will kick off with a television advertising blitz aimed at private investors. Just under a third of the shares are being set aside for the public.

The Government's advisers on the sale, BZW, initially estimated British Energy's value at pounds 2.4bn-pounds 2.8bn. But this was based on optimistic assumptions about electricity prices and the output levels its eight stations would achieve.

A flood of analysts' reports due out in the next week, starting with Hoare Govett's study, will take a much more cautious view.