Shareholder Executive

BNFL

Purpose

In 2003, a strategic review of BNFL concluded that the company’s focus should be on UK clean up (now undertaken through the NDA) with other businesses being run for value and to minimise risk to the UK taxpayer. BNFL was an international nuclear energy business employing some 23,000 people in 16 countries with activities spanning the entire nuclear energy cycle – from reactor design and fuel manufacture to power station decommissioning and clean up. It has been progressively dismantled since 2003, realising very substantial value for the taxpayer.

Following the successful sale or distribution of all of its operating assets, BNFL is a company with just two staff and assets sufficient to meet the liabilities arising from the various business disposals and complete the final closure of the business.

Legal Status and Ownership

BNFL is a limited company wholly owned by the Government. 49,999 ordinary shares of £1 each are owned by the Secretary of State for Business Innovation & Skills, and one ordinary share of £1 is owned by the Treasury Solicitor.

Government's Objectives

Over time, to pay the remaining liabilities as cleanly as possible and to return all remaining funds to the Treasury.

Financial Performance

£m	2009	2008	2007
Turnover	78	174	841
Operating Profit	9	41	62
Profit/(Loss) before interest and tax, after exceptionals	-	(168)	2,272
Profit/(Loss) for the year	1	(127)	2,225
Net Cash flow	(697)	(70)	102
Net Operating Assets	8	20	30
RONA	112.5%	205.0%	206.7%
Shareholders' Funds	312	945	1,225
Dividends2	-	-	-

Dividend policy

Since 2003 and during the wind down, the company’s focus is on UK clean up with its subsidiaries run for value. BNFL pays dividends based on the proceeds arising from the sale of subsidiaries and other assets and any surplus funds.

Performance targets

Targets are geared towards the timing of the dismantling, the sale of the subsidiaries, the proceeds received, and the orderly close out of remaining liabilities.

Notes

¹ Following the dismantling, Shareholder Executive officials have replaced the previous Directors in order to complete the final close down of the business.
² In 2007, BNFL paid a special dividend of £1.8bn to its shareholder, HM Government, which is not shown here. A special dividend of £260m was paid in 2008 and £632m in July 2008.

Commentary

As anticipated, the dismantling of BNFL was largely completed in November when Sellafield Limited was smoothly transferred to Nuclear Management Partners, the new parent body organisation, working for the NDA.The sale of the one third stake in AWEML (a joint venture with Serco and Lockheed Martin to manage the Atomic Weapons Complex on behalf of MOD) was then announced in December 2008 and completed in May 2009.The competition to appoint a management contractor to run the National Nuclear Laboratory was completed in April 2009.

The key steps in the dismantling have been:

• BNFL Inc – exit from loss making US clean up contracts in 2005 with the sale of remaining business to Energy Solutions and others at end of 2005
• transfer of all decommissioning assets and liabilities to NDA in 2005; BNFL retains no pre-2005 liabilities other than those related to its commercial businesses as mentioned below
• sale of Westinghouse to Toshiba in 2006
• decision in 2006 that UK clean up subsidiary, British Nuclear Group, should be dismantled to allow NDA clear run at competing Sellafield. This resulted in sales of:
  • Reactor Sites (Magnox Power Stations business) to Energy Solutions in 2007
  • Project Services (tier 2 engineering business supporting Sellafield and other sites) to VT Group in early 2008
  • One third share in AWEML to Jacobs in early May 2009
• transfer of the one third shareholding in URENCO to direct ownership of the then Department for Business, Enterprise and Regulatory Reform6
• transformation of Nexia Solutions (research and technology business) into the National Nuclear Laboratory in 2008.The business is now run on DECC’s behalf by SBM, a consortium of Serco, Battelle and the University of Manchester
• transfer of Sellafield Parent Body Organisation contract to Nuclear Management Partners on 24 November 2008 following NDA competition
• final meeting of BNFL Plc Board in December 2008 and departure of Directors. Residual legal entity as there are still liabilities to be retained by BIS while the remaining sale related liabilities (time bound warranties and indemnities) are extinguished.

The orderly dismantling is a significant achievement by the Directors and staff of BNFL. Substantial sums have been raised for the taxpayer (see case study in the Annual Review section of this report), and in 2008, the Government received a special dividend of £632m. The various subsidiaries now have promising futures with their new owners.