The cost of decommissioning the Magnox nuclear reactor estate has continued to rise, as new estimates reveal an increase from £2.7bn to £8.7bn since 2017
The Nuclear Decommissioning Authority (NDA) has incurred additional costs as a result of the failure of its Magnox contract, with the NDA agreeing to pay up to £20m to exit the contract early, according to an NAO report.
In September 2014, following a competitive procurement exercise, the NDA awarded a 14-year contract to manage the decommissioning of two nuclear sites and 10 Magnox sites to Cavendish Fluor Partnership (CFP).
In July 2016, the High Court ruled that the NDA had wrongly decided the outcome of the procurement process.
In 2017, the NDA paid £97.3m to settle legal claims with another bidder and decided, based on legal advice, to terminate the contract with CFP nine years early.
In October 2017 the NAO reported that the failed Magnox contract had already cost the taxpayer over £122m.
The total cost of the work needed to put the Magnox sites into the care and maintenance stage of the decommissioning process has also increased by up to an estimated £2.7bn since the NAO last reported on the contract in 2017.
Agreeing on a settle settlement
The NDA had six months between March and September 2017 to design and negotiate a revised contract while dealing with several legal risks and planning for its new subsidiary to take over the decommissioning work from September 2019.
The NDA has managed to avoid any further legal disputes with its supplier and other parties, while at the same time agreeing on a settlement which allowed it to leave its original decommissioning contract nine years early and oversee continued decommissioning work in the meantime.
CFP completed most of the decommissioning work it was asked to do under the renegotiated contract. It undertook £2.72bn of work, representing 93% of what it was asked to deliver over the five-year period.
It succeeded in placing the first Magnox station into a safe and enclosed state and completed the de-fuelling of the last Magnox station. However, CFP fully achieved only 45 of the 97 targets for the expected physical states for sites at the end of the contract.
A renegotiated contract
In renegotiating the contract in August 2017, the NDA agreed to pay CFP a fee of up to £152m subject to its performance in managing the decommissioning work.
This sum included a cost for early termination of the contract of around £20m to reduce the risk of further legal challenge and incentivise CFP to support the smooth transition to the new subsidiary taking over decommissioning from September 2019.
Costs are likely to be subject to further change, largely because of the inherent uncertainties involved in cleaning up the UK’s nuclear sites.
When it let the original Magnox contract, it had underestimated the scale of work needed to decommission sites.
Gareth Davies, the head of the NAO, said: “Since the failure of the original Magnox contract in 2017, the NDA has made progress in a number of areas. It renegotiated the contract, avoided further legal disputes and got on with decommissioning the power plants.
“However, the NDA now knows that it will cost significantly more to take the sites to the care and maintenance stage of the decommissioning process, though there remains inherent uncertainty about the final cost. It still needs to ensure it has a solid understanding of the condition of each Magnox site and the costs of cleaning them up.”
