What’s up with France over Nuclear?

  • hot and coldThe state owned nuclear giant Areva stayed out of hot water with investors.
  • EDF got a major boost with the European Union’s approval of a massive new 3.2 Gwe nuclear reactor complex at Hinkley Point in the U.K.
  • The lower house in the French Parliament voted to reduce the nation’s reliance on nuclear energy from 75% to 50%. It does not specify a source of replacement power.

French nuclear firm avoids becoming financial toast

Standard & Poors retained an investment grade rating for Areva after threatening to downgrade the nuclear firm’s stock to “junk” status. Such a move would have forced many large investors, such as pension funds, to dump the stock. Late last week S&P said it would keep, for now Areva’s BBB stock rating, but it also retained a long-term rating outlook as “negative.”

What kept Areva out of hot water, financially speaking, is a plan announced by its board to cut spending by 200 million euros ($252M) over the next two years and it will sell off so-called “non-core” assets and minority stakes in various projects worth, at least on paper, 450 million euros ($567M). Finally, the firm also committed to cutting back on investments in new projects.

Despite these measures, S&P estimated that Areva’s long-term debt could rise from 6.9 billion euros to 7.6 billion euros. A major source of future financial liabilities is the increasing cost of a reactor under construction in Finland.

The ratings agency said that while it expected Areva to achieve a “break even” financial position by 2016, if it didn’t, it would again consider down grading the stock to junk status.

EDF’s prospects rise with EU approval of Hinkley Point in U.K.

Action by the U.K. government to buy electricity from the planned nuclear power station at Hinkley Point at nearly double the current market price, for the first 35 years of operation, has given the project a much needed boost. The European Union, which has in the past opposed such subsidies, signed off on the deal. World Nuclear News has a detailed report on the subsidies, a profits sharing plan, and a guarantee for the debt.

The decision will help Areva out of the financial doldrums as Hinkley Point, which will be built and operated by EDF and Chinese firms, involves two 1650 MW EPR reactors. It is Areva’s flagship design and also one of the largest reactors in the world. The project was estimated in 2012 to have a cost of 16 billion euros ($20.16 billion).

While several Chinese firms are expected to be investors, and may supply some equipment for the project, they are not positioned to supply the reactors.

The Austrian government, which is resolutely opposed to nuclear energy, announced plans to file a lawsuit against the EU’s sign off on the subsidies for the project. Government officials said that feed-in tariffs for nuclear energy should be reserved for solar and wind energy projects. However, it appears to have escaped their notice that calling nuclear “unsustainable” due to the inability of capital markets to take on a project of this size does not make Hinkley Point “unsustainable.”

For its part the EU pointed out that it is not in the business of dictating to member states how to arrange their energy policies.

France may join Sweden in closing reactors

The lower house of the French Parliament fast tracked a bill this week to reduce the nation’s reliance on nuclear energy from 75% to 50%. Until now, France had planned on replacing aging reactors with new plants. The action follows a similar recent move by Sweden to reverse a similar long standing policy.

French energy minister Segolene Royal is the champion of the bill which has a major blind spot of not specifying where the replacement power will come from once the reactors are shut down. Currently, France gets about 63 GWe from its nuclear fleet. A 25% cut would reduce it to about 47 GWe.

France is building a new 1650 MW Areva EPR at Flammanville and some members of Parliament want to shut down an equivalent amount of older nuclear power stations due to the higher costs of meeting new post-Fukushima safety requirements. The new reactor is expected to enter revenue service by 2016.

The French legislation would also push energy conservation measures to reduce electricity consumption.

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