BNFL pursues US government over £100m shortfall

British Nuclear Fuels (BNFL) is to pursue the US government for more than £100m of compensation over two contracts that have run into trouble.

The controversial nuclear waste group is to demand recompense to cover £70m of losses it has incurred because the US Department of Energy suspended all operations that involved contaminated material following the 11 September terrorist attacks.

This hit BNFL's contract to clean up a contaminated site in the East Tennessee Technology Park at Oak Ridge, Tennessee, which was originally set up to process uranium for the Manhattan Project, which made the first atomic bomb.

Although the restrictions have now been lifted, BNFL has estimated that its losses because of the hold-up are £70m. The company made a provision in its accounts, which were published last week. It is understood that Hugh Collum, BNFL's chairman, is now pursuing the US Department of Energy for compensation to cover those losses.

This claim will come on top of an existing dispute between BNFL and the department after the company was sacked from a multi-billion- dollar contract to clean up the Hanford nuclear plant in Washington state.

BNFL was appointed to the clean-up in 1996, in a deal originally priced at $4bn (£2.5bn). The estimate of the cost rose to $7bn and then $15.2bn by 2000, when the then deputy energy secretary, TJ Glauthier, fired the company from the contract.

Mr Glauthier said he had serious concerns about BNFL's "business and management approach".

BNFL hired Ernst & Young, which is also its auditor, to frame a case for compensation from the US government. The British firm has been paid £200m from the contract but is believed to be pursuing another £40m.

Ernst & Young has been paid £1.5m in fees for its work on Hanford, which is more than the £1.4m it received for its audit of BNFL last year. All in all, the company paid Ernst & Young £3.9m last year, bringing the total amount of fees paid to the firm in the past three years by BNFL to more than £14m.

BNFL's accounts, published last week, show it is also hoping to claim nearly £700m in tax rebates because of the £2.33bn loss the group made last year. However, most of these tax rebates cannot be claimed until BNFL begins to make a profit.