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Duratek enters deal with BNFL Columbia company to get $17 million from partner in cleanup bid


GTS Duratek Inc., a small Columbia-based technology company, and the U.S. subsidiary of a large British nuclear service have signed a letter of intent to form a partnership to bid on billions of dollars in government contracts to clean up nuclear waste at U.S. weapons sites.

As part of the agreement announced yesterday, BNFL Inc., in Washington, will invest up to $17.5 million in Duratek to help advance its technology of converting nuclear waste into glass for safe storage.

The investment could also make BNFL, a subsidiary of British Nuclear Fuels PLC in Risley, England, a minority owner of Duratek.

This is the second time in the last nine months that Duratek and its technology have captured the attention of larger outside companies. In late January, the Carlyle Group, a Washington-based investment banking firm, acquired controlling interest in Duratek through an investment of $21 million in its stock.

"This is a tremendous positive for Duratek," Jeffrey C. Robins, an analyst with Gruntal & Co. in New York, said of Duratek's latest move. "It is a real vote of confidence in their technology."

"This brings more credibility to the Duratek process. They have attracted the attention of two companies in two different parts of the world and they are both large quality companies."

Luke T. Smith, an analyst with Chesapeake Research Inc., a Towson-based brokerage house that specializes in mid-Atlantic-based companies, said Duratek's formation of an alliance with BNFL might be more significant than its relationship with Carlyle.

"This is affirmation by an industry participant of Duratek's technology," he said.

Teaming with BNFL, Mr. Smith said, "brings Duratek a big step closer to that bonanza contract it has been waiting for for some time."

Robert E. Prince, president and chief executive of Duratek, said he sees the same opportunities.

"The BNFL strategic alliance, taken together with the Carlyle Group investment earlier this year, serves notice that our company has all the tools in place -- a high-powered technology, a broadened capital base, and highly capable industry allies -- to move to high levels of success on a global basis," Mr. Prince said.

Mr. Prince said Duratek, BNFL and a third team member to be announced later, will bid on contracts to be issued next year for the start of the cleanup of 61 million gallons of highly radioactive waste stored at the Department of Energy's nuclear weapons production complex in Hanford, Wash.

The first phase of this work will involve contracts to three groups to design plants to convert the waste into glass. Two of the three groups will then be selected to build plants on site. If Duratek is successful, Mr. Prince said it would mean $300 million in new business for the company and its partners over the next five years.

Duratek posted sales of $35.9 million last year and earned $257,000.

Referring to its agreement with BNFL, Mr. Prince said, "This positions us to be a big player, and Hanford is a gigantic job."

The Energy Department, the Environmental Protection Agency and the state of Washington have signed an agreement to spend $41 billion for the cleanup at Hanford over the next 20 years. The nuclear waste, some of it dating back to the Manhattan Project -- which produced the United States' first atomic bomb, is stored in 177 underground tanks. Some of the tanks are beginning to leak into the ground, Mr. Prince said.

Mr. Prince said Duratek's goal is to capture more than $1 billion of the Hanford cleanup work.

Richard H. Peebles, vice president of BNFL, said the company was attracted to Duratek because of the technology it developed in conjunction with Catholic University of America's Vitreous Laboratory in Washington.

"We believe it is better system for turning waste into glass than the French system we bought and have been using in Europe," said Mr. Peebles.

BNFL has been working with the Department of Energy for the last four years in determining the best solutions for the waste problems at Hanford and other nuclear weapon sites around the country.

British Nuclear Fuels, with annual sales of $2 billion, is a worldwide company involved in all phases of nuclear fuel. It produces nuclear fuels, provides it to power plants and stores the contaminated waste.

Mr. Prince said the agreement with BNFL is still subject to the approval of directors of both companies and should be finalized within two weeks.

Duratek's stock closed at $5.75 yesterday, up 25 cents.

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