Babcock in £50m UKAEA nuclear tie-up

Published on Friday 18 September 2009 21:34

BABCOCK International has swept up the commercial business of the UK Atomic Energy Agency for £50 million, as it seeks to build its stake in the growing nuclear decommissioning market.

Put up for sale in March, the UKAEA business is decommissioning former nuclear sites at Dounreay in Caithness, and Harwell and Winfrith in the south of England.

It also provides nuclear waste management services, with its more than 200 staff dominated by career nuclear engineers.

Babcock, which bought the business following an open auction, already manages and maintains Britain's nuclear submarine bases.

The FTSE 250 company said yesterday that the UKAEA deal would significantly extend its ability to deal with hazardous nuclear waste, adding skills "applicable to both the civil and military sectors".

Chief executive Peter Rogers said: "The high level of skills and expertise in UKAEA will further accelerate the growth of our nuclear business."

Even before the acquisition, London-based Babcock had identified nuclear as a possible growth engine, aiming to double the turnover of its nuclear business to more than 200m over the next two-to-three years.

Rogers said the group had identified the nuclear industry as a potential growth market several years ago.

While the firm was already a "tier one" contractor for military nuclear contracts, Rogers said acquiring the experienced workforce of the UKAEA would give it a leading position in the civil nuclear industry.

"These guys have an organisation that's been in and around the nuclear industry, and people who have been in the industry all their lives," Rogers said.

"They have very specific skills that are better than our skills today."

Commercial interest in the nuclear industry was given a shot in the arm after French giant EDF bought East Kilbride-based British Energy for 12.5 billion last year, promising to build four new power stations.

Babcock is aiming to pick up work on the periphery of the new reactor projects, probably focusing on fuel management systems.

Rogers indicated the group's main focus for growing its nuclear revenues would be on the decommissioning markets, in the UK and internationally.

The market for decommissioning ageing reactors worldwide is expected to top 70bn over the next two decades.

The acquisition would create "a credible British alternative" to American and French rivals which are leading the development of nuclear decommissioning expertise, Rogers claimed.

"The market for decommissioning is enormous, and if you add to that the support of existing operations and some new build, we have an enormous opportunity."

Shares in Babcock closed down 1 per cent at 567p.