* One of largest UK public contracts ever put out to tender
* Estimated savings of at least 1 bln stg over 14 years
* Babcock shares climb as much as 7 percent
(Adds background, updates share price)
By Li-mei Hoang and Brenda Goh
LONDON, March 31 Britain awarded a
7-billion-pound ($11.65 billion) contract to manage the
decommissioning of nearly half its nuclear sites to engineering
contractors Babcock and U.S. group Fluor in one of the largest
UK government contracts ever put out to tender.
The 14-year deal covers some of Britain's oldest nuclear
power sites include Hinkley, Sizewell and Dungeness.
Britain has moved to outsource large swathes of its public
sector services over the last 30 years, a practice which has
been heavily criticised in recent months after contractors such
as G4S and Serco were found to have overcharged
the government on contracts.
Among the services the government has recently attempted to
outsource include its defence equipment buying arm, a process
which collapsed after one of the only two bidders left in the
competition pulled out.
Britain's public services market is estimated to be worth up
to 50 billion pounds, according to the UK's National Audit
Office, second only in size to the U.S. market.
The Nuclear Decommissioning Authority (NDA) said the
contract would cover 12 of Britain's 25 nuclear sites and should
bring a saving of at least 1 billion pounds from the previous
contract, handled by EnergySolutions for the past 14 years.
The U.S. group had bid jointly with U.S. engineering sector
peer Bechtel for the new deal and said it would now "evaluate
its options" without giving any further details.
Shares in Babcock were the biggest gainers on the
FTSE 100 Index, trading 4.6 percent higher by 1412 GMT
having risen as much as 7 percent.
Numis Securities analyst Mike Murphy said the deal would be
worth more than 170 million pounds a year to Babcock,
representing over 4 percent of group revenue after adding sales
from the soon to be acquired helicopter transport services firm
"(This) cements their position as one of the UK's premier
critical engineering support services group," Murphy said.
"Babcock have got such a tremendous reputation with the
government in terms of delivering and I think that is the
important thing at the end of the day," he said.
Aside from EnergySolutions and Bechtel, Babcock and U.S.
group Fluor beat two other groups: Serco, Areva
and CH2M Hill, and Amec, Atkins and
Rolls-Royce in a two-year-long bidding process.
Sources familiar with the situation said that at least one
of the losing consortiums was looking at its legal options to
challenge the decision.
Cavendish Fluor, the joint venture between Babcock-owned
subsidiary Cavendish Nuclear and Fluor, will be formally awarded
the contract - pending legal approval - on Sept. 1, after a
ten-day mandatory standstill and a five-month transition period.
"Cavendish Fluor Partnership bring a successful track record
and extensive nuclear experience that will bring enormous
benefits to the decommissioning and clean-up programme," NDA
Chief Executive John Clarke said.
Although the government is focused on building new nuclear
plants, Britain's old stations and nuclear research sites will
remain sizeable employers as companies such as Babcock are hired
to clean up radioactive materials over decades.
The GMB union, which represents energy workers, said it
would be seeking urgent talks with the partnership and that it
was still "extremely concerned" that Britain had no strategic
direction for nuclear.
(Reporting by Li-mei Hoang, Brenda Goh and Karolin Schaps;
editing by Louise Ireland and Keiron Henderson)