British Energy

Procurement policy
As it is a utility company, British Energy is governed by EU requirements in terms of its procurement processes. It uses the Achilles database to select suppliers, and a prequalification process if more than four are identified.

Four companies are usually selected to bid against given specifications. The specifications vary depending on the project – for example, those for nuclear safety-related activities are more exacting than the specifications for conventional work.

Bidders are assessed against given selection criteria including safety and technical aspects of the tender proposals, the bidder's safety record, experience of similar work and whole-life costs.

Current and future projects
Capital expenditure in the UK fell from £133m to £111m in 2001/02, although total group expenditure, which includes Canadian and American operations, increased to £225m. Over the next few years, expenditure in the UK is set to fall in line with the group's current financial crises.

Due to the recent fall in wholesale electricity prices, and technical difficulties resulting in the closure of two plants in Scotland, British Energy is losing close to £300m a year. The group was recently given a £650m emergency loan by the government, and this has been extended to March 2003 to allow the company to negotiate with creditors and suppliers. Longer term, British Energy needs to cut costs by about £300m a year to offset losses in the UK.

Against the above background, any new nuclear power stations seem a long way off. Meanwhile, with all but one of Britain's nuclear power stations due to be closed by 2020, the costs associated with the decommissioning of nuclear power stations will rise. Significant construction work on them will not start until the stations have been made "safe". Firms are entering into contacts with the main clients, BNFL and British Energy, to discuss what is needed. The total cost of dealing with nuclear waste was recently estimated at £1.3bn a year. British Energy's decommissioning liabilities currently total £14bn.

Essential information
The government recently announced a new rescue package for British Energy. This included: extension of the £650m loan facility granted in 2002 to March 29 2003; a government contribution of £150-200m to British Energy's nuclear liability fund to help pay for decommissioning; the swapping of £1.3bn of debt for new shares; the provision by British Energy of £425m to government – in return the government will take ultimate responsibility for all decommissioning liabilities; BNFL to reduce its fuel bill to British Energy by about £150m a year; and the sale of British Energy's Canadian and US nuclear interests, which are expected to raise about £600m.