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The Nuclear Decommissioning Authority - Annual Report 2007/08
17 July 2008
The Nuclear Decommissioning Authority has today (Thursday 17 July) laid its 2007/08 Annual Report & Accounts before Parliament.
The NDA has made significant progress against its Government targets in respect of introducing competition, generating efficiencies and establishing a baseline estimate for the decommissioning nuclear liabilities:
- The contract for the first competition, for the parent body of Low Level Waste Repository Limited, was successfully awarded on 31 March 2008 to UK Nuclear Waste Management Limited. The competition for the parent body for Sellafield Limited has progressed well with the preferred bidder, Nuclear Management Partners Limited, announced on 11 July.
- Average annual net efficiency savings have exceeded the 2% annual target set for the CSR 2004 period (from 2005/06 to 2007/08). In 2007/08, £2,291 million of work was performed for a cost of £2,181 million, providing efficiencies of £110 million during the year. Over its first three years, NDA sites have delivered over £450 million of efficiencies before contractors’ fees.
- After three years of work we have now been able to produce an underpinned baseline for the cost of the decommissioning and clean-up programme. The discounted nuclear liability is now estimated at £40.7 billion, with a further £3.4 billion for the construction and lifetime costs of a deep geological disposal facility. The discounted total of the nuclear liabilities estimate has increased therefore to £44.1 billion (from £37 billion last year). The undiscounted costs for the 130-year programme of decommissioning and clean-up are £63.5 billion, and the NDA’s share of the undiscounted cost for construction and operation of the geological disposal facility is £10.1 billion. (A fuller explanation of the baseline estimate is provided in an appendix to this statement.)
Stephen Henwood, NDA Chairman, said:
“The NDA has continued to make encouraging progress against its mission. We are introducing world class management to our sites and delivering cost efficiencies in the execution of the decommissioning and clean-up programme, whilst simultaneously seeing improvements in health, safety, security and environmental performance.”
“With Government policy now clear in support of new nuclear build, interest remains high in the NDA’s progress on its programme to decommission and clean-up the UK’s civil nuclear legacy. But comparisons between the legacy, which has its roots in early scientific research and military uses, and the downstream costs associated with new build are very hard to make.
“When we took ownership for the 19 designated sites, it was clear that much work needed to be done to understand better the lifetime programme and costs for each site. After three years of investigation and analysis we now have a much improved understanding. Inevitably, this has resulted in increased costs.
“The £7 billion increase in the discounted cost can be explained in two parts: roughly half results from a combination of the re-phasing of work to focus on the higher hazards together with updated assumptions around inflation rates in the construction sector; the remainder arises from revisions to the Magnox Operating Programme and consequently the need to operate Sellafield reprocessing facilities for longer, as well as having greater certainty around the costs for intermediate level waste and contaminated land remediation.
“Our task going forward, together with our world-class contractors, is to bring these costs down over time.”
The NDA’s Chief Financial Officer, William Roberts, said:
“For the third year running the NDA was able to fund an increased programme of work and was able to overcome income shortfalls caused by operational plant problems.”
Safety, Security and Environment
Overall performance has further improved and the incident rate for industrial safety at most of our sites has remained low or decreased even further from the low rates recorded last year. A number of our sites have won RoSPA awards for their health and safety performance.
Financial and commercial performance
Despite income volatilities and some unplanned expenditure the NDA has delivered its planned programme of work. Income generated during the year was £1,458 million, an increase of £252 million from last year. Poor plant performance at THORP and SMP was offset by realising income from waste substitution contracts.
Significant progress has been achieved in the restructuring of the nuclear industry and introduction of competition. On 31 March 2008 we awarded the first Parent Body Organisation contract for the operation of the Low level Waste Repository near Drigg to UK Nuclear Waste Management Limited, a consortium of URS-Washington Division, Studsvik, Areva and Serco Assurance. The new contract has the potential to deliver significant savings as well as a 20 year extension to the operating life of the facility. This reinforces our firm belief that attracting world-class management teams to the UK market will deliver innovation and cost savings in our programme.
We have announced the preferred bidder for the Sellafield PBO contract earlier this month. Nuclear Management Partners Limited, consisting of Washington International Holdings Limited, AMEC and AREVA NC will bring world-class skills to bear on our largest and most complex site, subject to contract award in October. We are currently reviewing the remainder of the competition schedule and plan to make an announcement about future competitions by the end of the year.
Technology, Skills and R&D
The National Skills Academy for Nuclear was formally launched on 31 January 2008. It will play a key role in delivering the skills that will be required in the industry through its network of regional training clusters. The NDA has been particularly active in the development of the nuclear academy in West Cumbria, called Energus, a £20 million project to construct a world-class skills centre that will become the flagship of the network, and in the emerging Scottish Nuclear Skills Academy.
We have launched the first national NDA graduate recruitment scheme. Covering a period of two years the scheme accepted its first cohort of 12 graduates at the year end. We received more than 1,000 applications to join the scheme.
Direct investment in research and development in 2007/08 was £18 million. We have continued to sponsor relevant university research programmes.
- continuing to reduce hazards on our sites
- successful completion of the Sellafield PBO competition and subsequent transition of ownership
- ensuring that the remaining competitions are completed satisfactorily
- realising value from our assets, including land around our sites
- determining the best way of handling our stocks of plutonium and uranium
- working with government and communities on the programme for implementation of geological disposal for higher active wastes
- effectively handling the socio-economic challenges that our operations will present in many of our locations
- we will also be working with government to review the NDA funding model to ensure we have the best possible mechanism in place to maximise performance
Notes for Editors
A more detailed breakdown of the nuclear liability estimate is attached as an appendix to this press release.
Press and media enquiries should be made to Bill Hamilton, Head of Communications, on 01925 802193 or 07816 315132
Appendix: NDA publishes underpinned baseline costs for nuclear clean-up and the costs of the geological disposal facility
The NDA was established in April 2005 and inherited 19 sites that between them make up a highly complex nuclear legacy that has its roots in early scientific work, military objectives and pioneering civil power generation over the last 60 years. One of our key targets was to develop an understanding of the lifetime liability across our estate by 2008.
We have been working over the past three years to establish an underpinned baseline from which any future movement in costs of the decommissioning liability can be measured. To gain a full understanding of such a complex estate in a relatively short period of time has been a significant challenge. Together with our site contractors we have applied considerable effort to underpin the civil nuclear liability estimate. This has resulted in a baseline which we believe to be sufficiently robust for the purposes of measuring future performance and change.
These efforts have removed uncertainties in areas such as:
- detailing the scope of work to be carried out
- uncertainty of the contaminated land and groundwater treatment processes
- how best to transfer nuclear materials and wastes between sites
- quantification, volumes and packaging of waste
- understanding the hazards posed by materials and conditions of storage
Our progress over the last few years means that we now have a national overview of the decommissioning task and the logical order of activity to progress hazard reduction and site clean-up. Therefore, the risk of unnecessary expenditure being incurred is significantly reduced and we are in a much better position to ensure value for money to the taxpayer.
The condition of the estate the NDA inherited has proved to be more challenging than anyone previously understood and we are dealing with an evolving situation. Given the complexity of some of the sites and facilities there remains a risk of further uncertainties and increases in costs. While there are risks and assumptions that may result in the liability figure rising, there are also factors which have the potential to bring it down.
The competition process is bringing in new parent body organisations to provide strategic management to the site licence companies doing the work on the ground at our sites. They will improve decommissioning plans and deliver greater value for money. We have already started to see timescales and costs peak at two of our sites, with Dounreay showing a 10% decrease in the discounted provision worth £258 million and an 18% reduction at the Low Level Waste Repository worth £32 million.
In October 2006, Government made the NDA the implementing organisation for the design, construction and operation of the geological disposal facility. For the first time, the NDA Annual Report & Accounts has identified separately the costs associated with constructing a geological disposal facility for higher level wastes. The cost is influenced by many different factors, including the inventory of waste, the geology at the site chosen and its design. The current best estimate is £12.2 billion at 2008 prices although the NDA’s share of this is £10.1 billion.
Therefore, the NDA’s underpinned baseline for the discounted decommissioning nuclear liability is now estimated at £40.7 billion, with a further £3.4 billion for the construction and lifetime costs of a deep geological disposal facility. The discounted total of the nuclear liabilities estimate has increased therefore to £44.1 billion (from £37 billion last year). The undiscounted costs for the 130-year programme of decommissioning and clean-up are £63.5 billion, and the NDA’s share of the undiscounted cost for construction and operation of the geological disposal facility is £10.1 billion.
The table below sets out how the liability has moved since the NDA set about its task of understanding the true scale of the decommissioning and clean-up task:
|Cost of decommissioning||40.7||63.5|
|Cost of GDF||3.4||10.1|
The 2005/06 liability resulted from the NDA’s contractors submitting plans which set out their programmes of work until site closure, which in some cases is over 100 years into the future.
In 2006/07, the liability increased primarily for two reasons: better definition of the scope of works necessary to deal with the Legacy Ponds and Silos at Sellafield; and, more detailed assessments of contaminated land.
In 2007/08, the liability has increased due to a variety of factors:
- the Magnox Operating Programme review identified significant changes to previous assumptions about the time period necessary for defuelling Magnox stations and reprocessing spent fuels
- subsequent increases in costs for operations and facilities at Sellafield
- greater certainty around the costs for dealing with intermediate level waste and contaminated land remediation
- adjustments to reflect inflationary pressures in the construction sector
- re-phasing of plans in order to focus on higher hazards
In presenting this 2007/08 baseline estimate the NDA is clear that further movements may occur in the future, for instance, as a result of potential changes to Government policy or regulatory requirements.