France’s nuclear destiny depends on rescuing Areva

While most press reports have focused on Areva’s financial troubles caused by the schedule delays and cost increases for one reactor under construction in Finland, and another in France, what the French government is more likely looking at is who or what will replace the current fleet of nuclear reactors as they start hitting the 40 year mark in 2020.

In just six years as much as half of the French nuclear fleet, mostly 900 MW units, will start to click over on their service life odometers past year 40. Taken together the 22 reactors provide just about half of the total electricity generated by nuclear power.  The other half, generated by reactors built in the 1990s, are 22 of the fleet’s 1300 MW units. Some of them will start hitting the 40 year mark starting in 2030.

By 2040 even with aggressive light water life extension methods, France is going to be looking for new nuclear reactors sooner rather than later.  The reasons are the long time lines to build new units and the large capital requirements to pay for them.

french nuclear power WNA

French Nuclear Power – Table courtesy of World Nuclear Association

The questions for the French government, which has made mastery of commercial nuclear light water reactor technology a matter of national economic security, is what reactor design it will use to replace these units and who will build them?

Assuming the government will seek to replace all 63 GWe of the current fleet over a period of 30-40 years starting in 2020, if it chooses to build the current 1600 MW Areva EPR design, it will need 40 of them.

At a current price of an estimated $6,000/Kw, the capital requirements would likely make any future French finance minister run for the Alps to hide out in a Mongolian yurt way off the grid.

This means the French government, currently headed by the wildly unpopular François Hollande, may have a point in wanting to reduce dependence on nuclear power over time. The problem with Hollande’s politically expedient alliance with the anti-nuclear Green Party, is that neither of them have a plan for replacing aging reactors with other forms of base load electrical supply that can also reduce carbon emissions.

Where this leaves analysts scratching their heads is how the government plans to merge two state-own corporations, EDF and Areva, who’s CEO’s insist on acting like they are privately held corporations. Less than 15% of the stock of either firm is in private hands.

So far EDF has offered 2 billion euros to acquire Areva’s reactor division. That offer had not set well with Areva’s chairman Philippe Varin who told Reuters June 10 he wants “an equitable negotiation” with EDF which translates into providing capital requirements of at least 5 billion and as much as 7 billion euros to get the firm back on its feet.

Varin also said that he is opposed to being left holding the bag, so to speak, with Areva’s debts related to cost over runs on the Finnish reactor.  While many of the causes of the schedule delays, and related increased costs, have been made subject to arbitration with German technology giant Siemens, and Finland’s TVO utility, it is unlikely there will be final resolution of claims and counter claims for at least several years. Similar problems have emerged in the construction of an EPR at Flamanville in France, but here the key stakeholders are all French.

That said, Varin also told Reuters he thinks some of the claims may be settled sooner which would reduce the risk of merging Areva’s reactor division with EDF.  That reduced risk would translate into confidence to put more money into the troubled business unit.

Other investors show interest

Varin said that two other entities are interested in investing in Areva. The first are several Chinese state-owned nuclear firms which want access to Areva’s ongoing reactor maintenance services division.

In addition to the servicing of the reactors globally, which is a reliable source of revenue that justifies an equity investment, the Chinese firms also want entry into the UK nuclear market where Areva is poised to provide two 1600 MW EPRs to the Hinkley Point project and possibly two more at Sizewell.

Separately, Mitsubishi Heavy Industries confirmed to Reuters June 11 that it is also interested in an equity investment in Areva.

The president of the Japanese company, Shunichi Miyanaga, told the Asahi newspaper in an interview, “We will no doubt be consulted (by Areva). Because of our long relationship and, if cooperation is sought, we would consider it seriously.”

Mitsubishi Heavy and Areva are collaborating on building a nuclear plant in Turkey. The 4,800 megawatt plant in the Black Sea coastal town of Sinop, which is estimated to cost $22 billion, will use 1100 MW Atmea1 reactors the design for which was developed by both companies.

Where these investments would leave EDF is uncertain, but if the firm sticks to its plan to only offer 2 billion Euros, Areva could pick up as much as another 5 billion euros from other organizations, outside of France, leaving EDF in a minority position in terms of its equity stake.

French nuclear regulator tells Areva to close a deal

The French nuclear safety agency, ASN, issued a statement June 11 telling EDF and Areva to get the lead out and wrap up a rescue plan as soon as possible.  ASN Director Pierre-Franck Chevet told Reuters in an interview that he thinks safety at the French nuclear fleet could be affected if the two firms remain distracted by their financial negotiations.

He added that once a deal is done, the transition to a new arrangement must go as quickly as possible.

Areva employs about 200,000 workers most of them Europe.

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One Response to France’s nuclear destiny depends on rescuing Areva

  1. camiel says:

    It is an interesting article about Areva and France’s nuclear energy future, Dan. Thank you.

    EDF acquiring the reactor division of Areva seems a bit odd and unusual, as EDF is a utility and not an engineering group. I don’t know of any such an example, perhaps KEPCO in South Korea ? Somehow it is also logical as EDF has much deeper pockets and therefore the ability to absorb potential losses of nuclear engineering projects.

    The French government and EDF will have to start thinking about how France will be powered in about 20 years as the current PWRs reach the end of their life. They will need to think long and hard, as no other nation has so much riding on nuclear energy (approx. 80% of electricity generation; France also has a lot of electric heating). I cannot fathom France going back to coal and natural gas. The renewables push by the Socialist Party cannot really be taken seriously, as wind and solar are not capable of baseload electricity generation. It is to be hoped that France can replace its current PWRs with Generation IV reactors (SFRs or preferably MSFRs) in 20 to 25 years time.

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