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Global Fuel Wars Could Foil UK Nuclear Plans
London
NYSE: AOC

LONDON, 9 April 2008 – Global fuel wars could foil John Hutton MP’s plans to expand Britain’s nuclear power industry in a £20 billion boost to the economy, according to the world’s leading insurance broker and risk adviser Aon. The UK government and its subcontractors will need to rely on enduring good relationships with Australia and Africa, key suppliers of uranium, to secure its safe arrival in the long term goals of the expanding industry.

 

Safety breaches are touted as the biggest concern over nuclear plants despite the fact that the industry is one of the most regulated in the world. The key issues actually concern the delivery of uranium or ‘yellow cake’, mainly exported from Australia to the UK, where it is enriched to become nuclear fuel. Key challenges for the UK government’s plans include:

 

  • Political risks – in a world increasingly driven by fuel security, it will be crucial to maintain friendly relations with Australia. However, the government must consider the threat of expropriation and supply chain disruption, as seen in Venezuela, Bolivia and Russia. Out of the African exporters of uranium, Aon’s 2008 Political & Economic Risk Map identifies Niger as the highest risk with the potential for political interference and legal and regulatory issues. However, South Africa and Gabon are classed as medium risk while Namibia is low risk.
  • Terrorism risks – uranium does not become useful until it is enriched at a nuclear treatment facility but the potential threat remains for terrorists to hijack ships to disrupt Britain’s nuclear industry.

 

Hamish Roberts, the newly appointed managing director of Aon’s natural resources team, comments: “Hutton’s plans for nuclear expansion are achievable but only if the government thinks beyond just the risks of safety to the threat of fuel security. Coupled with battles over water shortages, fuel supply will be the biggest challenge of our generation.

 

“In terms of building new sites, these will be the most complex projects seen for years, bearing in mind the last UK nuclear plant was built in 1988. Nuclear construction poses the same complex risks as building any other power plant – that is until the fuel is introduced. But we’ll see fierce competition for the public finance initiative contracts, which will be driven by both price and robust risk mitigation plans. These plans will demonstrate the industry’s ability to process large volumes of complex liability claims in the event of a radioactive leak, such as Chernobyl or Three Mile Island.

 

“In addition, the government must address the existing problems of nuclear waste disposal. Since the first UK nuclear plant in 1953, it is estimated that the industry has only produced the equivalent of three double-decker buses’ worth of highly radioactive waste. This waste once vitrified in small quantities is buried or stored. There is no perfect solution to long term storage so engineers must work towards a revised strategy as to when the next phase of plants are introduced.

 

“This is an opportunity for the insurance industry to bring about innovation and flexibility to respond to the new nuclear goals and recognise the potential scale of losses for the public, industry and government.”

 

 

Ends

For more information contact:

Alexandra Lewis

020 7882 0541

Alexandra.lewis@aon.co.uk

 

About Aon

Aon Corporation (NYSE:AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 37,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was ranked by A.M. Best as the number one global insurance brokerage in 2007 based on brokerage revenues, and voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 by the readers of Business Insurance. For more information on Aon, log onto www.aon.com

 

 

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