Nuclear Wastelands Going Out With Big Bucks Bang - Contractors Whimper with Delight

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Written by Richard Finlayson, International Correspondent for Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). As Washington Group International (NYSE:WGII) (Boise, Idaho) and Raytheon Technical Services (NYSE:RTN) (Waltham, Massachusetts) work on $466 million contracts replacing weapons-grade Siberian plutonium reactors with fossil fuel power plants, companies in the U.K. are eyeing a national nuclear clean-up program that could cost an estimated $86 billion before it is completed, some decades in the future.

Starting in 2008, the U.K.'s Nuclear Decommissioning Authority (NDA) is scheduled to start handing out $3.75 billion in nuclear plant decommissioning contracts annually. The Committee on Radioactive Waste Management (CoRWM) should be working in parallel with the NDA in recommending what should be done with the nuclear waste. Half of the work must be put out to competitive tender, which could mean almost $40 billion to the contracted companies. British Nuclear Fuels (BNFL) (London, U.K.) and U.K. Atomic Energy Authority (UKAEA) will continue with decommissioning work through 2008.

Eyeing this prospect with something not far short of uncontrolled delight are a number of companies, including front runner Amec (LSE:AMEC) (London, U.K.) and Fluor (NYSE:FLR) (Aliso Viejo, California), Jacobs Engineering (NYSE:JEC) (Pasadena, California), and Bechtel (San Francisco, California). The NDA chairman, Sir Anthony Cleaver, has said that the Authority was considering awarding profit margins of 8% to 12%, based on similar incentives current in the U.S. He added that if the contractors 'outperform,' by completing work ahead of schedule or below budget, they could earn a 6% bonus margin. Some of the companies in the running for contracts say that they have been told that they could expect to earn margins of up to 20%.

There has been strong negative reaction to the cocoon-like terms being offered by the NDA. The Independent reported Norman Baker, the Liberal Democrat environment spokesman, as saying, "This does represent value for money. The nuclear industry over the past few years has been a license to print taxpayers’ money to an extraordinary extent."

Before the profit margin was revealed, The Independent on Sunday reported that in March, companies that win contracts would not face financial penalties if they fail to carry out the required work. The whole process has been criticized for a lack of scientific rigor. Potential contractors, meanwhile, claim the need for big incentives to cover their liabilities, if, for example, the clean-up costs more than expected. (Tell that to the taxpayer.)

Estimates put the total of nuclear waste at more than thirty sites around the U.K. at 470,000 cubic meters. A number of solutions have been offered at public hearings, including blasting the offending waste into space in a rocket. Another option may be the construction of a long-term repository. If this is recommended by CoRWM, a body called Nirex will manage the construction.

Meanwhile in Siberia, the Washington Group International is progressing with the $285 million contract to refurbish power generating plants as part of a U.S.DOE program to permanently shut down the last three weapons-grade plutonium production reactors in the region. These reactors are reported have an annual plutonium production of 1.5 tons - enough for 300 nuclear weapons.

The DOE's National Nuclear Security Administration (NNSA) initially announced the program in 2003. The three reactors supply heat and electricity to the local domestic market and produce the plutonium as a byproduct. WGI will rebuild coal-fired units in Seversk, near Tomsk, which will allow two of the three reactors to be shut down.

The project will include refurbishing or replacing existing coal-fired boilers, supplying one new high-pressure coal-fired boiler, replacing turbine generators, completing construction of the fuel supply system, and refurbishing the industrial heating unit and ancillary systems. WGI will work for the five-year period of the contract with the DoE, NNSA, and Russia's Rosatom. The Russian contractor Rosamtroi and Russian subcontractors are also involved in the project. Completion is scheduled for 2009, although work may have progressed to the point of enabling the shutdown of one reactor in 2007.

At the Zheleznogorsk site, Raytheon Technical Services (RTI) will work on the $181 million contract, to provide a co-generation boiler, an extraction/condensing steam turbine, heating-only boilers, a fuel handling system, an ash removal system, environmental controls, and a hot water pipeline to connect the new plant with the district heating system. This 117 MW plant will replace the third reactor and is scheduled for completion in 2011.

While the three reactors continue running while the new plants are under construction, high security upgrades have been introduced. The three units are considered to be among the highest risk reactors in the world.

No doubt WGI and RTI in Siberia will be casting interested glances towards the UK program, with its heartwarming margins and simple rocket science suggestions...But wait, some DoE officials have been heard to estimate that the final cost of the refurbishments in Siberia will come in at $1 billion, rather than the quoted $466 million. A nice bit of cost proliferation in keeping with the great nuclear tradition.

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