Magnox’s savings scheme

State-owned electricity generator Magnox has achieved substantial cuts in its financial liabilities after divorce from Nuclear Electric By Anthony Gould

Next month, Magnox Electric sees the first anniversary of operating and trading on its own account, having been split from Nuclear Electric.

Although Magnox is a major generator, with six working nuclear power stations, these are all nearing the end of their useful life. It also has three power stations – Berkeley, Hunterston A and Trawsfynydd – which have been closed.

The state-owned business faces liabilities of around £8.9bn for all nine of these, for decommissioning, waste management and reprocessing spent fuel. But despite this apparent dead weight, Magnox still harbours hopes of becoming a profitable operation by 2000. It is some challenge.

But it has made a good start. Magnox expects to reduce its liability by 5%, or £450m, this year, when its accounts are published in July.

The man charged with managing the liability, Dennis Joynson, is in a confident mood. As director of liabilities and decommissioning, he argues that Magnox can make substantial strides in closing the funding gap on its nuclear responsibilities following a concerted programme of attacking costs.

Although cuts of 5% could not be sustained year on year, cuts of 2-3% should be, said Joynson.

This year’s savings follow various initiatives: sharper focus on the customer-supplier relationship with British Nuclear Fuels, increased competitiveness in its award of projects, and securing an exact and equitable share of BNFL and Nirex’s costs. The £8.9bn includes decommissioning costs based on the reference case Magnox inherited from the Central Electricity Generating Board and Nuclear Electric.

Magnox claims to have halved the previously forecast cost of removing spent fuel from decommissioned plants and to have cut by more than half the time needed to remove the fuel.

Defuelling its Berkeley station, on the River Severn, in 1989 – the first to be shut – was expected to cost £64m and take five years. Magnox removed more than 40,000 fuel elements from each of the reactors in three years, at a cost of £41m.

Trawsfynydd, in Snowdonia National Park, was closed in 1993. The defuelling, involving the removal of more than 30,000 fuel elements from each of the reactors, took only two years and cost £32m.

Another saving is foreseen by using the safestore approach for dealing with radioactive waste. If applied to all of its sites, Joynson says it could reduce the total discounted cost by some £600m.

The refusal of planning permission for a Nirex deep underground repository at Sellafield was, admitted Joynson, `a bit of a disconnect for all of us’. Magnox has a 35% share of Nirex.

If savings continue at a good rate this year, the proposed merger of Magnox with British Nuclear Fuels, the state-owned nuclear fuels and waste management company, must look more appealing to BNFL.

{{Magnox Electric’s nuclear liabilities(£bn in 1996 money values)

Undiscounted 3% discounted

Magnox sites & facilities 6.2 1.9Spent fuel 3.4 2.3BNFL sites & facilities 7.2 4.0Waste disposal 1.3 0.6Other sites & facilities 0.1 0.1

Total 18.2 8.9}}