On the risk of sounding like a broken record: the French nuclear flagship the EPR continues to be troubled with additional costs, delays and doubts. In France and Finland the EPR construction is further delayed and AREVA added 400 million to its provisions for the reactor under construction in Olkiluoto, resulting in a downgrading of the company’s profitability.
On 6 July 2010, the French newspaper Le Figaro posed three pressing questions about the EPR (European Pressurized-water Reactor): Is the EPR too complex? Is the EPR too expensive? Is the EPR exportable? In short the answers are: yes, the EPR is complicated to build, which makes construction expensive and the EPR difficult to sell in emerging markets. The newspaper states that EDF, the French utility building the EPR in Flamanville, France, is expected to announce a delay in construction of about 2 years. The construction started in 2007 and was originally scheduled to be finished within 4.5 years. According to an insider, the two-year delay is a low estimate, “which is essential to make public: all departments concerned within the group know that this major project is faced with numerous technical obstacles” .
The Flamanville story is following the same lines as Olkiluoto-3, the EPR under construction in Finland. In the beginning of June 2010, AREVA presented a new timetable for the completion of Olkiluoto-3, stating that “most of the works will be completed by the end of 2012” . Since commissioning of the plant will be earliest six months after completion, operation would not start before June 2013. The total building time since start of construction in July 2005 has now doubled to more than 8 years.
A completion date of the end of 2012 is looking extremely optimistic. The most challenging phases of construction are still underway or to come, including the installation of heavy components, the design and installation of computer systems, and the final testing and licensing.
On top of that, in the case of Olkiluoto-3, the start-up time may be significantly longer than six months, especially as it is a first-of-a-kind project. The last pressurized water reactors (PWR) built in Europe, at the Temelin nuclear power plant in the Czech Republic, took over a year before the completed reactors were able to commercially operate at full output (in the early 2000s). The Temelin-1 reactor took even 18 months to start full commercial operation. Connecting major components, setting up cable connections (thousands of kilometers of cables were involved), debugging of digital control systems, and tuning up the reactor turbines all proved enormously difficult and time consuming.
Finnish parliament votes for more nuclear. On 1 July 2010, the parliament in Finland chose to ignore the majority of the Finnish people, who according to polls oppose new nuclear power, and voted in favor of a government decision to give two political permits for new nuclear reactors. This political permit opens the way for two nuclear companies TVO and Fennovoima to plan reactors, call for vendors, try to secure financing and later apply for construction permits. Actual new reactor projects are still far away. The biggest hurdle will be the investment decisions, expected in 2012. Both TVO and Fennovoima still have various reactor designs on the table.
The debate in the Finnish parliament was not about energy arguments. In a dirty political game the decision was influenced by behind the scenes discussions and special interest groups anticipating the upcoming national elections. Finland has no need for new reactors; energy efficiency measures in combination with available sustainable energy sources can easily cover the energy demand.
On 24 June, AREVA was forced to announce another 400 million Euro provision to cover the additional costs of building the Olkiluoto-3 reactor . This provision is on top of 2.3 billion Euro provisions put aside in previous years and brings the current estimated cost overrun to 2.7 billion Euro. The initial cost of the project was 3.2 billion Euro, hence the total bill is now approximately 6 billion Euro. It is important to note that this 400 million Euro extra loss is assuming Olkiluoto-3 startup late 2012, while in reality this will not be before mid 2013.
While the rocketing costs of the Finnish EPR have dragged down AREVA's results for years, this is the first time that they have sent the company into the red. The company reported an operating loss for the first half of 2010. In 2009, AREVA's reported operating income was just 97 million Euro. The company’s financial health suffers thanks to the Olkiluoto-3 project, while it struggles to build up its reserves for planned future investments. And most probably the latest provision for Olkiluoto-3 cost overruns will not be the last.
A few days after AREVA’s provision announcement, Standard & Poor's downgraded the company to a ‘BBB+’ rating, citing continued weakened profitability . The S&P credit analyst announced: "Depressed profitability at France-based nuclear services provider AREVA is being further strained by the recently announced additional provision of €400 million (US$491mn) for the OL-3 [Olkiluoto-3] Finnish reactor." Also AREVA’s ongoing fight with EDF about the uranium enrichment plant Georges Besse in France is seen as a potential threat to the company’s profitability. The long and short-term credit ratings on AREVA are lowered from ‘A/A-1’ to ‘BBB+/A-2’. S&P expects AREVA’s profitability "will continue to be depressed over the next couple of years", and its operating performance will continue to be severely affected by cost overruns related to Olkiluoto-3.
Contact: Rianne Teule, Nuclear campaigner Greenpeace International. Ottho Heldringstraat 5, 1066 AZ Amsterdam, The Netherlands.
Tel: + 31 20 718 2229
Email: [email protected]