Meeting title AUTHORITY BOARD MEETING Date and time WEDNESDAY 20 FEBRUARY 2019, 09.00 – 14.00 Location MARRIOTT HIGHCLIFF HOTEL, BOURNEMOUTH

MINUTES

Present Tom Smith Chairman Janet Ashdown Senior Non-Executive Director Evelyn Dickey Non-Executive Director Volker Beckers Non-Executive Director Rob Holden Non-Executive Director Candida Morley Non-Executive Director, UK Government Investments (UKGI) David Peattie Chief Executive Officer (CEO) David Batters Chief Financial Officer (CFO)

In Attendance Alan Cumming Director of Nuclear Operations (DNO) Paul Vallance Director of Communications and Stakeholder Relations Jeremy Harrison Director of Risk and Assurance Adrian Simper Director of Strategy and Technology Neil Hewlett General Counsel and Company Secretary (GC) Elizabeth Hodgson Board Secretary

Item 1 Procedural and Compliance 1.1 There were no apologies for absence and the Chairman noted that a quorum was present. 1.2 There were no additional conflicts of interest to declare. 1.3 Members reviewed and approved the minutes from the meeting held on 20 January 2019, subject to some minor amendments outlined in the meeting. Members discussed the need for consistency between the minutes and sanction-related Board statements to BEIS. 1.4 Members noted the Decision Record from the meeting held on 20 January 2019 and requested it be further aligned with the wording of the final version of the minutes. 1.5 Board Matters 1.5.1 The Chairman informed Members of his visit to Herdus House on 28 January, where he had met a group of employees and had been encouraged by their enthusiasm and commitment to the mission. There had been positive feedback about the direction of travel for the new NDA but also constructive criticism and suggestions that he had shared with the CEO and non-executive directors. 1.5.2 The Chairman also noted the UKGI Board visit to Limited and his regular six monthly meeting with representatives of the . 1.6 Geological Disposal Facility (GDF) Senior Responsible Officer (SRO) transition 1.6.1 The Non-Executive Director, UKGI, Candida Morley, declared an element of conflict in relation to this item but the Board agreed she should continue to participate in the meeting.

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1.6.2 The DNO explained that the current SRO is Stephen Speed, of BEIS, at least until the Major Projects Review Group report. The Board was asked to consider whether a NDA executive should take on the SRO role and, if so, what the appropriate timing of that change would be. 1.6.3 Members discussed the extensive role specification and accountabilities of an SRO and agreed that in the present phase of the GDF project it appears to fit better within policy space than delivery space. Members requested the Executive provide additional consideration to both the capacity and capability of NDA to take on the SRO role at this time and the governance aspects of the role and to discuss the most appropriate arrangement with BEIS. Action 01: CEO and DNO to further discuss GDF SRO role with BEIS.

Item 2 Safety Update 2.1 The DNO provided an update on safety matters around the estate. The RIDDOR rate remains similar to last year and largely comprises conventional safety matters. Work is ongoing with all areas of the estate to produce a 5 year health and safety plan which will be reviewed at the Safety and Security Committee in the first instance. The DNO noted a meeting has taken place with the Office for Nuclear Regulation (ONR) to establish the formalities around the relationship and the Levels 1, 2 and 3 meetings. 2.2 The DNO summarised the safety performance around the sites, noting a real improvement at and LLWR. A failed lifting beam incident took place at Dragon on the site in January 2019. There were no casualties but it was a very dangerous occurrence. Members asked the DNO to feedback that this should have been mentioned during the Board’s site visit that took place the previous day. 2.3 The DNO provided an update on the interviews for a Director of Health and Safety and summarised a number of other appointments within the Nuclear Operations Team. 2.4 Members noted the Safety Update.

Item 3 Main Board Matters The HR Director, David Vineall, and Security and Corporate Services Manager, [Minute redacted – s.40 Personal], joined the meeting. 3.1 One NDA Update 3.1.1 The Security and Corporate Services Manager provided an update on engagement with Members, the One NDA Handbook and arrangements for eventual Board approval. She thanked the NEDs for their participation in the individual feedback sessions and noted the comments were being incorporated. Wider engagement with the Estate is proceeding well and there is general support for the benefits of One NDA. There are various levels of appetite for detail so it is important to pitch the Handbook in an appropriate manner. A red team review is taking place next week, including a representative from the ONR, and a specific session is being held with the Sellafield Limited Board. 3.1.2 The Security and Corporate Services Manager explained the Handbook would be multi-format but an electronic version is likely to be the most appropriate format to allow updates. External operating model examples have been used to help structure the Handbook, which is around 50 pages long. 3.1.3 Members noted the timescales for further input to and approval of the One NDA Handbook. The Security and Corporate Services Manager, [Minute redacted – s.40 Personal] left the meeting. 3.1.4 The HR Director introduced the Organisational Design work underway. It was an important outcome of the Way Ahead initiative of the previous 18 months. There were various internal and external factors behind the changes, including the futureproofing of the organisation and increasing NDA’s capacity and capability. It is also a response to the change from a wholly PBO Redacted NDA Board Meeting February 2019 2

model to a mix of subsidiary and PBO models. A handout was provided which consolidates the information previously provided with updated figures. 3.1.5 The HR Director confirmed a robust process of analysis and evaluation has been undertaken with Korn Ferry and it is now time to start communicating and consulting with the wider organisation. Engagement is taking place with Prospect and the Staff Consultation Group. 3.1.6 The HR Director presented the Organisational Design priorities, notably upskilling certain roles, role clarity, better leveraging of resources and enabling career development. Members noted the latest Executive team accountabilities and the strengthening of the Executive team. The key focus areas for each function were also noted. Members queried the multiple references to programme and project management, which were confusing, and it was agreed better terminology would be used. Members wished to see the plan to upskill on project management. Action 01a: HR Director to provide plan to evidence upskilling on project management. 3.1.7 [Minute redacted – s.36 Policy] 3.1.8 Members understood the step change delivered by each element and proposed it would be useful to map function and extra scope to funding. Members requested to see the full costs of the programme, specifically with ancillary costs included e.g. accommodation, support and IT and felt effective staff communication [Minute redacted – s.36 Policy] would be very important. 3.1.9 The HR Director explained the formal consultation would begin in March 2019 and take three to four months and then recruitment would begin. Members noted the substantial amount of change in NDA already and the Executive should bear the impact of that in mind when embarking on the planned staff consultation. 3.1.10 Subject to the circulation of additional information via email with fully built up costs included, the Board approved the recommendation for 2019/2020 expenditure on headcount and noted the anticipated request for additional funding to support the longer term achievement of the organisation design. [Minute redacted – s.36 Policy] Action 02: HR Director to circulate further Organisational Development information as soon as possible to include fully built up costs. 3.2 Options for management of Intermediate Level Waste (ILW) 3.2.1 The Director of Strategy and Technology updated the Board on strategic options under examination for changes in the handling of some ILW. [Minute redacted – s.36 Policy] 3.2.2 [Minute redacted – s.36 Policy] 3.3 Gender Pay Gap Group Data 3.3.1 Gender Pay Gap information will be published in the same format as last year on 26 March (slightly ahead of the deadline). The HR Director explained the lag in reporting means the data published in March 2019 dates from 2017/18, when only a partial staff bonus was paid. 3.3.2 The HR Director summarised the Group data. The requirement to publish data only relates to businesses with over 250 employees. 3.3.3 The key reasons for the difference in gender pay were outlined; there is an imbalance in gender distribution, with only 26% women in the workforce, the low rate of attrition and churn limits opportunities and the skills pipeline remains male dominated. The change since last year is attributable to voluntary redundancies, internal promotions and more diverse panels when recruiting. 3.3.4 Members queried what gender pay gap NDA should aspire to and what actions are needed to achieve that. 3.3.5 Following the discussion on Gender Pay Gap Group Data, the Board supported the publication of the data in March 2019 and endorsed the actions proposed, including a suggestion to set a target for the NDA CC based on modelled potential future scenarios.

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Action 03: HR Director to consider setting a Gender Pay Gap target for the NDA Corporate Centre and model potential future scenarios. The HR Director, David Vineall, left the meeting. The Nuclear Operations Manager, [Minute redacted – s.40 Personal], the Dounreay Programme Manager, [Minute redacted – s.40 Personal] , Commercial Lawyer, [Minute redacted – s.40 Personal] and Pinsent Masons lawyer [Minute redacted – s.40 Personal] joined the meeting by telephone. 3.4 Dounreay Site Wide Impact (SWI) Prioritisation Base Line Change Proposal (BCP) 3.4.1 Members were provided copies of an updated Question and Answer sheet to UKGI queries and the related Pinsent Masons legal confirmation in relation to the responses. The DNO summarised the outcome of previous meetings held and observed that individual discussions have taken place with Members regarding the BCP. 3.4.2 [Minute redacted – s.42 Legal] 3.4.3 The Director of Risk and Assurance explained the original assurance work undertaken by Deloitte was closed out through Assurance of Action Plan (AAP) and the actions have been separated into those specific to the SWI and those which will be undertaken for the Full Business Case (FBC). The full assurance forward programme for the FBC will overlay risk analysis on the assurance work so there is better confidence around the P50 and P80 figures and there are appropriate assurance interventions throughout the process. Action 04: Director of Risk and Assurance to provide full assurance plan for Dounreay Site Wide Impact BCP and subsequent FBC. 3.4.4 Members shared concerns about the significant change in the value of the BCP and felt the contractor’s approach to the changes had been poor. The number of review points had necessitated a huge amount of resource. The DNO agreed greater oversight and focus of the PBO is needed and lessons were being shared with the rest of the Estate, for example, in the treatment of disallowable costs. 3.4.5 [Minute redacted – s.42 Legal] 3.4.6 The Board discussed whether the change to the BCP was a matter within the NDA’s delegated authority. The question was being jointly reviewed by NDA and UKGI/BEIS. A quick decision would be taken to expedite consideration and approval of the BCP, if necessary taking it through Government sanction process. 3.4.7 The Board approved the Dounreay SWI BCP on the following basis: • A BCP change value of [Minute redacted – s.43(2) Commercial] in nominal values. • An extension of the Interim End State @ P50 to June 2032. The Nuclear Operations Manager, [Minute redacted – s.40 Personal] the Dounreay Programme Manager, [Minute redacted – s.40 Personal] , Commercial Lawyer, [Minute redacted – s.40 Personal] and Pinsent Masons lawyer [Minute redacted – s.40 Personal] left the meeting. The Head of Commercial Revenues, [Minute redacted – s.40 Personal] joined the meeting by telephone. 3.5 Settlement of outstanding [Minute redacted – s.36 Policy] liabilities 3.5.1 The Head of Commercial Revenues provided the background to the historic reprocessing contracts and NDA’s commercial strategy in closing out waste contracts. [Minute redacted – s.36 Policy] 3.5.2 The Head of Commercial Revenues outlined the breakdown of the headline [Minute redacted – s.43(2) Commercial] settlement agreement that had been negotiated: • [Minute redacted – s.43(2) Commercial] • [Minute redacted – s.43(2) Commercial] • [Minute redacted – s.43(2) Commercial]

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3.5.3 Contractualisation of the title transfers is anticipated in March 2019 (pre-Brexit). [Minute redacted – s.43(2) Commercial] 3.5.4 The CEO commended the work the Head of Commercial Revenues and the new Commercial team (who transferred from INS) have done, which the Board fully endorsed. 3.5.5 [Minute redacted – s.43(2) Commercial] The Head of Commercial Revenues, [Minute redacted – s.40 Personal] left the meeting.

3.6 Sanction Forward Plans 3.6.1 The CFO explained the Board would receive six sanctions in the next three months. The NDA Sanction Committee has a cluster of sanctions in March, three of which require Government approval. A more rigorous approach from Sellafield Limited is positive but has impacted on timescales. Key items for the Programmes and Projects Committee are GDF Project 2 and High Integrity Stainless Steel Containers (HISSC). 3.6.2 The Board noted the Sanction Decision Log.

Item 4 Performance Review 4.1 Audit and Risk Assurance Committee (A&RAC) Report 4.1.1 The Chair of the A&RAC explained the January meeting had discussed three key themes; cyber security, risk management and the spending review. 4.1.2 The Chair of the A&RAC explained that the comprehensive update on cyber objectives and actions was very worthwhile and the presentation to the Committee had covered the assessment of maturity around the Estate against the NIST framework. The team had outlined key actions for 2019/20 and the Committee were pleased with the benchmarking against external frameworks. An equivalent of a ‘safety walk’ is needed for cyber security. 4.1.3 The A&RAC had also received a comprehensive risk management report by [Minute redacted – s.40 Policy] which has showed the NDA framework is not as effective as it could be, is overly- engineered and can lack focus. Clearly defined lines of defence are required. Board input will be needed to define the risk appetite, which will then be cascaded to the businesses. 4.1.3 The Director of Risk and Assurance explained this is not another wholesale change to risk management but more of an evolution, for example, the ownership of the Corporate Strategic Risks is being reviewed. The integration of systems across the estate could be improved. 4.1.4 The Director of Risk and Assurance confirmed he will work with the Board on the risk management actions in place and will provide more information on the top down v bottom up approach, the three lines of defence and risk appetite. 4.1.5 The Board requested sight of the spending review presentation. Action 04a: CFO to provide Board with spending review presentation seen by the Audit and Risk Assurance Committee. Volker Beckers and the Director of Strategy and Technology left the meeting. 4.2 Performance Report 4.2.1 The CEO presented the Quarter 3 Performance Report, reporting NDA is on target to meet or exceed all financial targets and, presently, 80% of key delivery targets. Safety at Sellafield Limited remains an area of focus. There is good progress in recruitment of additional capability. 4.2.2 Members felt the security page of the Performance Report needed strengthening, with actions / mitigations included. Members observed the funding for 2019/20 [Minute redacted – s.43(2) Commercial] but that cost pressures remain at Sellafield Limited and the Executive are

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considering the affordability of certain projects. The CFO explained revised long term provision discount rates resulted in a £99bn credit to AME with regards to the nuclear provision. 4.2.3 The Board noted the Performance Report. 4.3 Action Update 4.3.1 In response to Action 1374, financial tests, Candida Morley provided information on the HMG announcement of revised financial standing tests to apply to all future and existing government (including arms-length bodies) procurements. The impact on the Estate will need to be understood. Information has since been circulated to the Executive. 4.3.2 The Senior Non-executive Director explained that the gap analysis against the UK Governance Code (Action 1328) had been completed and two main areas had been identified for action, one within the jurisdiction of the Remuneration Committee, and one regarding Board engagement with the workforce and stakeholders, which will be the subject of a paper at a later Board meeting. 4.3.3 It was agreed that the deadline for Action 1329 should be extended and that the cyber security update (Action 1330) would be taken at the May Board. 4.4 2018 Board Evaluation Actions 4.4.1 The Chairman summarised the 2018 Board Evaluation Actions which were due in February 2019, noting a Nominations Committee has been set up but cannot yet take into account the final Holliday Report findings and an annual strategy meeting should be included in the Board visit to Herdus in June 2019. Members discussed the requirement for six-monthly Non-Executive Director meetings with the Permanent Secretary and how best to schedule these. 4.4.2 It was agreed there would be one further session held in April to review the 2018 Board Evaluation Actions and Members would be asked for a collective judgement on how well the actions have been addressed.

Item 5 Matters for Noting 5.1 Forward Agenda 5.1.1 The Board considered the forward agenda, noting a number of additions for March and April, in particular. The Chair proposed that the March and April meetings, being so close together, be treated as two parts of one meeting, with the April meeting focusing on sanctions. The Chair requested that the visit to Herdus House in June involve two overnight stays, to enable a strategy session and visit to Sellafield on 18 June and the Board on 19 June. The Chair proposed the October meeting involve a visit to Chapelcross and would be another overnight stay. 5.2 Any Other Business 5.2.1 The Chair informed Members he had identified an individual to benefit from the Board shadowing opportunity, [Minute redacted – s.40 Personal] The Chair requested the Executive consider ways to offer Board exposure and/or career development to women executives in the estate. 5.2.2 It was noted that the Board had received since the last meeting the following documents: • Update on Executive Changes, email, 11 February 2019 • Sellafield Limited tribunal, email, 13 February 2019 • CEO Update to the Board, email, 15 February 2019 5.2.3 The Board reviewed the meeting effectiveness and agreed the venue had worked well and the agenda had flowed, helped by familiarity with a number of the topics. Candida Morley provided some positive feedback from HMG on the new keyholder and assurance process on 3m3 boxes. 5.2.4 There being no other business the meeting closed at 14.00.

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………………………………………………………………………………………………. Chairman

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