APPENDIX 5
Supplementary Memorandum by the Department
of Trade and Industry
NUCLEAR LIABILITIES
INVESTMENT PORTFOLIO
1. The Committee asked for precise details
of the amount of money in the Nuclear Liabilities Investment Portfolio
(NLIP) held by BNFL. On 1 April 2005, £700 million was transferred
from the portfolio to the consolidated fund and will be credited
to the Nuclear Decommissioning Funding Account. This leaves approximately
£3 billion still in the NLIP. BNFL will retain this for the
duration of the Commission's State Aid investigation. This will
provide comfort to the customers of the wider BNFL group and to
the directors that the group is able to continue to trade during
this period, despite still having decommissioning liabilities
on their balance sheet that outweigh their assets. But the NLIP
will be ring-fenced during this time and BNFL will only be able
to draw down on it if they would otherwise be unable to meet debts
as they fall due, or with the agreement of the Secretary of State.
We expect the remaining balance of the NLIP to be transferred
to the consolidated fund and credited to the Nuclear Decommissioning
Funding Account once state aids clearance is received and all
BNFL's decommissioning liabilities derecognised.
NDA INCOME PROJECTIONS
2. We undertook to provide details of the
income that the Nuclear Decommissioning Authority (NDA) expected
to receive from commercial activities in 2005-06. The NDA's budget
was set on the basis of forecast income in 2005-06 of £1,084
million. This income will be provided by: the sale of the electricity
generated by Magnox power stations; operations of the Thorp spent
fuel reprocessing plant; and fuel manufacture at Springfields
and at the Sellafield Mox Plant. In practice, the NDA's income
in any year may be higher or lower than forecast depending on
their success in managing performance and on external factors
such as electricity prices. They will be expected to manage any
short-term fluctuations in income by reducing costs or re-programming
decommissioning work. They will also have flexibility to carry
forward any unspent receipts into future years. NDA's latest forecast
of income in 2005-06 is £1,207 million.
NDA FUNDING
3. As with other Government bodies, NDA
grant-funding is set as part of the spending review process and
its budget up until 2007-08 was set in SR2004. The option of NDA
funding being placed in a segregated fund was discussed in the
White Paper. But after further consideration it was concluded
that there was no compelling reason to arrange for this. Government
has made a clear commitment to meet the costs of nuclear decommissioning
over the long term; and has instead established a segregated account
(the Nuclear Decommissioning Funding Account). The Government
intends that, once state aids clearance is received, the opening
balance credited to the NDFA should be sufficient to fund the
NDA for at least a 10-year period. But the relatively generous
spending settlement agreed for NDA as part SR2004, and credited
to the Account, should provide stakeholders with reassurance that
we are committed to adequately funding clean-up and decommissioning
work in the UK. The NDA's Strategy will set out its plans for
the longer-term on this basis.
April 2005
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