Locals struggling at Sellafield

Monday, February 25, 2008

The complex job of cleaning up Britain’s dirtiest nuclear site is drawing some of the world’s biggest engineering companies to the poorest corner of north-west England, but local companies are wondering how they will fare in the fight for lucrative contracts.

Sellafield, in Cumbria, is the biggest prize currently available in nuclear decommissioning, with decades of work to undo the problems caused by 50 years of atomic research.

The site has long provided jobs and opportunities in an area with few other prospects.

But the break-up of the state-owned UK nuclear industry has introduced challenges for companies that have built up substantial expertise in selling their services to Sellafield.

Nuclear decommissioning has been “start-stop” so far because of financial pressures, causing problems for contractors, according to a recent National Audit Office report on the Nuclear Decommissioning Authority, the government body that now owns Sellafield and many other nuclear sites. The report is to be discussed by a committee of MPs today.

The NDA budget has come under pressure because of shortfalls in the amount of commercial reprocessing work that the authority has been able to carry out.

That has come in addition to the steadily rising estimated cost of decommissioning. Some local contractors have voiced disappointment at the levels of funding available for decommissioning, saying that delays to the work could mean local skills and capabilities being lost.

At the same time larger, “bundled” contracts have become more prevalent, making it more difficult for smaller local suppliers to compete.

Many companies are trying to beef up their nuclear expertise and one group of local companies has been successful in gaining one of four “framework agreements” to offer decommissioning services at Sellafield. Cumbria Nuclear Solutions was set up last year by five companies including James Fisher Nuclear, a division of the listed marine services company, and Stobbarts, a civil engineering firm.

However, it is still uncertain what stance towards local contractors will be taken by any of the four global consortiums, involving companies such as Serco, Toshiba, Areva, Bechtel and Fluor, which are competing for a contract to run Sellafield. The contract, to be awarded this year, is expected to be worth £1bn annually over 17 years.

“We are watching with interest,” said an executive at one local company. Decommissioning is required to take into account the local socio-economic impact and foster a healthy local supply chain.

But tender rules mean local companies cannot be directly favoured. Socio-economic criteria will be used to judge the four bids to run Sellafield but will be only a minor test compared with bidders’ expertise in nuclear fields.

Rosie Mathisen, nuclear opportunities manager at West Lakes Renaissance, an urban regeneration company, says socio-economic tests are “not going to make an enormous amount of difference”.

Ms Mathisen says smaller local companies are being encouraged to start looking beyond their back yard.

“We have had to work with Sellafield and the NDA to encourage smaller companies to realise that the market is not Sellafield any more but the tier-two contractors.

“It is a different market.”

The Sellafield area, which has already become Britain’s nuclear epicentre, wants to develop its expertise in nuclear and other power industries and in that way become known as the “Energy Coast”.

It is seeing an influx of international companies opening offices and will be home to a nuclear skills academy, being set up to counter the problem of a rapidly ageing workforce just as the nuclear industry seems set for a new lease of life with government plans to build more power stations.

Copyright The Financial Times Limited 2008

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