nuclear-news

Gloomy financial situation for AREVA in so many ways

Despite the guaranteed increased purchase price for Hinkley Point C’s power, however, investors are not in a hurry to jump on board with a project where Areva will not just build the reactors but is also to bring in funding in the amount of 10% of the project’s total cost. The problem is that last fall, the company admitted it was having serious economic difficulties, which may cause it to fail to deliver on the financial commitments in the Hinkley Point C project.

Areva’s economic troubles have to do with another project the company is pursuing: the highly problematic reactor construction at a new site in Olkiluoto, Finland.

Survival of the fittest? World’s major nuclear builders are in for a long stretch in the red, Bellona, May 18, 2015 by Vladimir Slivyak, Translated by Maria Kaminskaya MOSCOW 

“………..The project considered to be the flagship for the French nuclear industry in Europe is the nuclear power plant Hinkley Point C in Great Britain, estimated at €24 billion. The project envisions building two reactors of the EPR – for “European Pressurized Reactor” – design in Somerset, in England’s southwest. No new reactor construction was previously undertaken in Great Britain for a period of many years, and, on account of nuclear energy’s less than perfect reputation from the economic point of view, such a large-scale endeavor in a country with a market economy seemed quite unlikely.

Yet, the project received both the British government’s approval and state guarantees on a fixed purchase price for the power the future plant will be generating. A favorable determination on the project was eventually also handed down by the European Commission, which had been looking into the legality of the state guarantees provided to Hinkley Point C. What the grievances against the project boil down to is that purchase of power from Hinkley Point C at a guaranteed price – one that is substantially higher than today’s energy prices – has too close a semblance to state subsidies, and the latter is prohibited in the EU. This was the reason why far from all the European ministers voted in favor of the project, and litigation is still expected on the matter: Austria, which has voiced its disagreement with the European Commission’s decision, intends to challenge it in court.

Despite the guaranteed increased purchase price for Hinkley Point C’s power, however, investors are not in a hurry to jump on board with a project where Areva will not just build the reactors but is also to bring in funding in the amount of 10% of the project’s total cost. The problem is that last fall, the company admitted it was having serious economic difficulties, which may cause it to fail to deliver on the financial commitments in the Hinkley Point C project.

Areva’s economic troubles have to do with another project the company is pursuing: the highly problematic reactor construction at a new site in Olkiluoto, Finland. The financial losses Areva sustained from the project in 2014 came to almost €5 billion. Meanwhile, the total cost of the project has more than doubled (growing approximately to €8 billion) since it was started, and the launch has been pushed back by almost 10 years from the initially scheduled date of 2009. Areva has announced a crisis recovery plan estimated at €1 billion until 2017 is in the works. Most likely, these measures will include over 1,000 layoffs and sale of some of the company’s assets. The national energy company EDF is also expected to help with investments into Areva’s reactor-building business. Just as it happens in such cases in Russia, the holes in Areva’s pockets will be patched with state budget funds – proof once again that unless it can help itself to some taxpayer money, nuclear energy is unfit to survive in a free market economy.

As for the Hinkley Point construction, companies from Kuwait, Qatar, Saudi Arabia, and the future plant’s home country, Great Britain, have been named as potential investors, but none of them opted to join the project. Another potential investor is the China National Nuclear Corporation (CNNC). However, China’s state funding could only come into the project on the condition that the corporation would be given the right to own a new NPP at the Bradwell site in Essex, in England’s southeast. As Nick Butler, a former special adviser to Great Britain’s ex-Prime Minister Gordon Brown, wrote in his article on the website of the Financial Times, a problem could arise here in that this would necessitate also granting the Chinese corporation access to the national grid, which has exceptional strategic significance.

Both the EPR in Finland’s Olkiluoto and an analogous domestic project in France are lagging far behind schedule and have run substantially over budget. The government of India is slowly progressing with an EPR project in Jaitapur, on which a preliminary agreement has already been reached with Areva. Only time will tell whether the French giant’s attempts to promote the EPR technology will be successful in Saudi Arabia and other Arab countries, but it seems unlikely that Areva’s potential customers will feel inspired by the saga with the dramatic cost overruns in the company’s project in Finland.

Looking further into the future, the French will have to brace themselves for even harder times to come. In the 2020s, France is expected to start decommissioning those of its reactors that will have reached the end of their engineered service life. The decommissioning program is already estimated at €300 billion, and no one can guarantee that while in the process these costs will not rise further…..http://bellona.org/news/uncategorized/2015-05-survival-fittest-worlds-major-nuclear-builders-long-stretch-red

May 20, 2015 - Posted by Christina Macpherson | business and costs, France