The Nuclear Liabilities Fund (‘NLF’) was established by HM Government on 28 March 1996, as part of the privatisation arrangements for British Energy Group Plc (now renamed EDF Energy Nuclear Generation Group Limited (“EDFE”)). The NLF’s purpose is to provide funding for the eventual decommissioning of the eight nuclear power stations (‘the Stations’) operated by EDFE. These comprised, and continue to comprise, seven advanced gas cooled reactor stations (‘AGRs’) and one pressurised water reactor station (‘PWR’).
The NLF is a company registered in Scotland and is owned by The Nuclear Trust (‘The Trust’) which is a public trust established under Scottish Law. The main purpose of The Trust is ‘to protect and to preserve for the benefit of the nation the environment of the United Kingdom’ by being a member of the NLF, a company with the principal object of providing ‘arrangements for funding the costs of decommissioning the Stations’ and paying for certain other uncontracted liabilities.The NLF is The Trust’s only asset and the purpose of the structure is to provide a secure and segregated pool of monies held for the specific purpose of decommissioning the Stations. There are five trustees of The Trust, of whom three have been appointed by HM Government and two by EDFE. They also act as the five directors of the NLF. Details of the current trustees/directors can be found under ‘Directors/Trustees’.
At inception the NLF was called the Nuclear Generation Decommissioning Fund. It received an initial endowment from HM Government of £228m and thereafter British Energy was obliged to make quarterly contributions to the Fund of initially £4m each.
As a consequence of the restructuring of British Energy, which was completed on 14 January 2005, there were significant changes to the manner in which the decommissioning liabilities of the Stations were to be funded and also for the funding of certain of British Energy’s contracted and uncontracted nuclear liabilities (together called ‘the qualifying liabilities’).
At this point, The Fund was renamed the Nuclear Liabilities Fund and certain new agreements were entered into with HM Government and British Energy; the Contribution Agreement (‘CA’) and the Nuclear Liabilities Funding Agreement (‘NLFA’). Both have been amended as a consequence of the sale of the NLF’s remaining stake in British Energy in 2009.The principal obligations, duties and rights of the NLF as set out in the CA and the NLFA are:-
Until the purchase of British Energy by EdF, completed on 19 January 2009, the NLF was entitled to receive in each financial year a percentage of British Energy’s free cash flow. The percentage was initially 65%. The NLF also enjoyed the right to convert its cash flow percentage into British Energy shares. The first conversion was in May 2007 when some 28% of the NLF’s interest in British Energy was converted into shares which were immediately sold, raising £2.3bn. The NLF’s remaining stake in British Energy was purchased by EdF in January 2009 when the NLF received £4.4bn for its residual interest.At 31 March 2012 the NLF assets after deducting current liabilities were valued at £8.652bn. HM Government announced at the time of British Energy’s restructuring that it would fund the qualifying liabilities to the extent that they exceed all the assets of the Fund.