Nuclear expenses sparks row

MARY FAGAN

Industrial Correspondent

A political row has erupted over the fund to be set up to cover future nuclear decommissioning costs in the soon-to-be-privatised industry. It has emerged that the annual payments made by British Energy, the company running the nation's most modern reactors, will be only pounds 15m - up to 50 per cent less than originally envisaged by the Government.

John Battle, shadow energy spokesman, yesterday attacked the Government for playing a "sleight of hand game" with the privatisation at the expense of the public and said he would be demanding an immediate explanation from ministers.

"They are fattening the company up to make it a more attractive prospect for investors at the expense of taxpayers.

"What I fear is that in five years time the Public Accounts Committee will condemn this as having been a shabby deal for the public but by then it will be too late," he said.

Mike Kirwan, British Energy's finance director, said that the "surprisingly small" annual payments can be explained by lower decommissioning costs and the Government actuaries' view of what an investment portfolio should achieve. The amount put into the so-called segregated fund will be to cover costs stretching out over many years.

The debate over the pounds 2.5bn privatisation took a further new twist when John Robb, British Energy's chairman, said he was in favour of share option schemes for directors and employees in spite of the recent rows over "fat cats" in private utilities.

He said: "I am talking about pushing them right down the management chain."

Mr Robb said that although no decisions have been taken "I have always found them a reasonable way of rewarding and motivating senior management". He said that in a company such as British Energy, they could be awarded to those earning pounds 20,000 to pounds 30,000 per year and above.

British Energy is still locked in battle with the Government over the financial structure of the company once it is sold, including the level of debt it will carry, the expected profitability and the value of the assets. Mr Robb said: "The Government has an obligation to maximise sales value to taxpayers. The board is in a different position. We also have an obligation to the new owners."