Taxpayers facing £100m bill over botched nuclear deal

Taxpayers face a £100m bill after the Government agreed a pay-out to two US firms over the botched handling of a nuclear decommissioning contract.

Energy Secretary Greg Clark also ordered an independent inquiry led by former National Grid (LSE: NG.L - news) boss Steve Holliday after a "flawed" tendering process for the £6bn deal.

The 14-year contract with joint venture Cavendish Fluor Partnership to decommission 12 redundant Magnox nuclear power sites will now be scrapped nine years early in 2019.

Mr Clark said: "This was a defective procurement, with significant financial consequences, and I am determined that the reasons for it should be exposed and understood; that those responsible should be properly held to account; and that it should never happen again."

Labour said the Government had shown "dramatic levels of incompetence".

Shares (Berlin: DI6.BE - news) in Britain's Babcock International (LSE: BAB.L - news) , which has a 65% stake in the venture that won the contract, fell 4% as it said the termination would blow an £800m hole in its £20bn order book.

The Government's Nuclear Decommissioning Authority (NDA) has agreed out-of-court settlements with two companies that had sued it over the original contract award.

It will pay £85m including costs to Energy Solutions plus £12.5m including costs to Bechtel.

Mr Clark said it was clear that the tender process "was flawed" and that given the "very substantial costs" resulting to taxpayers there needed to be an independent inquiry.

The decommissioning work at the centre of the deal began in 2014.

It covers defunct older nuclear plants at sites including Dungeness, Sizewell, Hinkley Point and Wylfa.

But Mr Clark said, in a written ministerial statement, that it had become clear there was a "significant mismatch" between the work specified in the contract and the work that actually needs to be done.

He said the additional work meant there had been a "material change" in the specification on which bidders were invited to tender in 2012, and the NDA would terminate the deal.

The decision was no reflection on the performance of the firms in the current deal, he said.

Mr Holliday's investigation into the process from procurement to termination of the contract will make recommendations, including whether disciplinary proceedings should take place.

Shadow energy secretary Rebecca Long-Bailey said: "By cancelling just two years into a 14-year contract, the Government has shown dramatic levels of incompetence in the procurement process of this deal.

"British taxpayers who stand to lose nearly £100m should be asking themselves not just whether they are willing to put up with such ineptitude but also whether the Government actually has a well thought-out and long-term nuclear decommissioning strategy."