Shareholder Executive

Urenco

Purpose

Urenco is a leading global provider of value added services and technology to the nuclear generation industry worldwide. Its focus is on providing safe, cost effective and reliable uranium enrichment services for civil power generation. Urenco operates in a pivotal area of the nuclear fuel supply chain for the generation of electricity for consumers around the world. With its industry-leading centrifuge technology and around 23% global market share, Urenco is firmly positioned in the highest added value segment at the front end of the fuel supply chain.

Legal Status and Ownership

Urenco is an UK registered private limited company in which the UK Government holds a 33.3% share. The other shareholders are the Dutch Government with 33.3% and the German Utilities RWE and E.On with 33.3%.

As of 1 April 2008, the UK Government owns 56m 'A' ordinary shares in Urenco Limited through its wholly-owned subsidiary, Enrichment Holdings Limited.

Government Objectives

• further development of enrichment services providing security of supply of nuclear fuel to customers
• successful project execution of Urenco's expansion programme in Europe and the US with a total planned capacity increase to 15,000 tSW/a by 2012 from its current level of 9,600 tSW/a. Initial capacity in the US will become available in 2009
• maintenance of Urenco's position as a reliable, long-term supplier, with future business based on long-term contracts
• continual investment in the development of employees to ensure the future success of the Group
• expansion of alignment processes across the Group in order to develop further a 'one company' culture
• continued investment in Research & Development to ensure Urenco remains a world leader in uranium enrichment technology.

Financial Performance*

£m	2007	2006	2005
Turnover	701	609	499
Operating Profit	242	241	207
Profit/(Loss) for the year	163	147	121
Net Cash flow	(7)	(4)	5
Net Operating Assets1	1,303	1,033	938
RONA	18.6%	23.3%	22.1%
Shareholders' Funds	591	491	449
Dividends	82	90	56

* Urenco reports in Euros. These figures are converted into £ Sterling using average rate for each year. Urenco has a 31 December year end.
1 Adjusted for provisions relating to nuclear activities (decommissioning and tails).

Commentary

Urenco transferred to the direct ownership of the Secretary of State for Business on 1 April 2008. The 33.3% shareholding was previously held through BNFL plc.

Urenco enjoyed another successful year in 2007 with operations in the UK, Germany and the Netherlands delivering a safe, reliable and financially strong performance, and construction of the National Enrichment Facility, the Group's enrichment facility in the US state of New Mexico, progressing well.

Investments increased by 50% to €527m in 2007, requiring significant additional funding. Urenco successfully concluded a number of external funding exercises during 2007 and the first quarter of 2008, raising new debt facilities totalling over €900m. In addition, Urenco successfully issued a €500m Eurobond, listed on the London Stock Exchange, in May 2008.

Despite high levels of investment, Urenco's strong financial position has been sustained. During 2007 the Urenco Group net profit increased by 14% to €239m. EBITDA rose by 3% to €542m and turnover was €1,024m reflecting an increase of almost 15%. Before start-up costs relating to the National Enrichment Facility, EBITDA and net profi t grew by 8% and 16% respectively.

The enrichment market continues to grow, driving increased demand for Urenco's services. As a result, Urenco's order book grew further during the year and now extends beyond 2025. The key focus for 2007 was 'building for the future' to ensure that sufficient capacity is in place to satisfy this demand and support Urenco's customers over the long-term. A significant investment programme is now underway to add enrichment capacity at the business' three sites across Europe and to deliver the National Enrichment Facility in the United States.