France’s government is giving mixed messages on future of nuclear energy

EDF gives Macron little reason to come clean on nuclear https://www.ft.com/content/adbe9da6-0ab8-11ea-bb52-34c8d9dc6d84 Problems at a flagship nuclear reactor means French government can take time over future of EDF, BEN HALL , Europe editor NOVEMBER 20 2019

The earthquake that shook the Rhone valley in south-east France last week could have been another financial disaster for energy giant EDF in what has been a bruising year. Its share price has taken a battering over concerns that it will struggle to pay for the upkeep of its ageing fleet of reactors, find money to build new ones and service its €37bn of net debt. The worries have been amplified by further delays and cost overruns at the mammoth nuclear plant it is building on the Normandy coast. The Rhone valley is home to four of the country’s 19 atomic power stations and a nuclear fuel processing facility, all operated by EDF. The tremor was the worst to hit France in 16 years. Three reactors at Cruas had to be shut down until mid-December for mandatory safety checks.

“It made me shudder,” said one French official. At 5.4 on the Richter scale, the quake was not strong enough to damage or seriously disrupt EDF reactors. Anything worse, the official said, could have killed confidence in what was only recently regarded as an industrial crown jewel, an emblem of France’s technical ingenuity and energy independence. That confidence had been dealt a blow last month in a damning report commissioned by the government into what has gone wrong in Normandy, with France’s first European Pressurised Reactor, a bigger, safer and more efficient type of plant. The EPR at Flamanville was supposed to have cost €3.3bn and taken four and a half years to build. Instead, the price has ballooned fourfold and construction will last 15 years.

The report, by Jean-Martin Folz, a former boss of Peugeot, identified a litany of failures, starting with EDF’s initial gross underestimation of costs and construction challenges, multiple delays, faults and technical problems, poor project management, chronic tensions among contractors and partners and a lack of technical skills. Many of the flaws in construction have come from substandard welding contractors. The report also pointed to the stop-start nature of France’s nuclear reactor construction after the 1980s splurge. Work at Flamanville began in 2007. Work on the last reactor before that began in 1991.

The French government, which owns 83.7 per cent of the company, is giving mixed messages about the way forward. It will not decide whether to build more EPRs until Flamanville is up and running — conveniently after the 2022 presidential election, allowing Emmanuel Macron to avoid the wrath of France’s increasingly powerful environmental movement. But according to Le Monde newspaper, the government has also secretly ordered EDF to draw up a feasibility study for six new EPRs built in pairs.

Under an energy planning law enacted this year, France must reduce the share of its electricity produced by nuclear from 72 per cent to 50 per cent by 2035, with the rest coming from renewables. EDF will have to shut down 14 ageing reactors. Given the expected rise in energy demand, though, it will have to extend the life of many others.

So for Jean-Bernard Lévy, EDF chief executive, a bigger problem than when to build new EPRs is persuading the government to raise electricity prices to help the company finance a vast maintenance and investment programme — not easy when your big flagship project has been so badly managed. UBS estimates a total investment requirement of more than €100bn, if 80 per cent of today’s reactors secure a 20-year life extension.

Ministers and EDF have floated the idea of splitting EDF into a nuclear arm and renewables one to help persuade EU authorities that it would not use more generous electricity tariffs to cross-subsidise renewables and to raise money for wind and solar energy, where France lags behind its European partners. But France’s trade unions dislike the idea, fearing partial flotation of the renewables arm could lead to full privatisation.

“The restructuring is definitely interesting for shareholders. But the longer you have to wait, the longer you have for things to surprise you in the business,” said Sam Arie, analyst at UBS. That has been the story of 2019, with a litany of problems at Flamanville and other plants weighing on the share price. The failures at Flamanville have given Paris reason to withhold the clarity EDF needs — even if Mr Macron’s regards the nuclear industry as a strategic asset for France and Europe. The risks of nuclear power to health and safety and the costs of decommissioning and waste storage may be overblown, as Jonathan Ford has argued in this column. But if the more basic challenge of building vaguely on time or on budget cannot be met, nuclear energy soon loses its appeal. ben.hall@ft.com

November 23, 2019 - Posted by Christina Macpherson | France, politics

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