Is nuclear new build on the wane?

south west | the environment | press release Friday October 02, 2009 19:25 by Jim Duffy - Stop Hinkley stophinkley at aol dot com 07798 666756

There is increasing evidence that the plans by foreign companies EdF and Eon to build nuclear reactors in the West Country may be on the wane.

A fresh report by the Adam Smith Institute (1) provides some doubt over the plans of the respective companies due to changes of circumstances in their own countries.

The changes in Germany which may affect Eon's plans to build at Oldbury relate to the recent election of a centre-right wing government which supports the life extension of German reactors previously outlawed under a Green-Socialist alliance. This means they are likely to invest in their domestic market in refurbishing these reactors while also trying to reduce their £40 billion debt.

EdF who propose to build two reactors at Hinkley Point are facing a £32 billion debt and their Chief Executive was last week replaced following his request to the French Government for a 20 percent price-hike in electricity prices. President Sarkozy only permitted a two percent rise which will produce about £0.6 billion. The proposed reactors are likely to cost about £5 billion apiece.

But EdF must also consider its domestic market as half its ageing fleet of reactors is coming up for their 30 year inspection. The regulators will then licence them for the final ten years of their 40 year life. EdF is hoping to extend the licences for up to 50 and then 60 years. This would mean an upgrade as all the systems would have aged, especially the control systems.

Many of the major components have already been exchanged, see Geriatric Design Assement (http://www.after-oil.co.uk/GDA.htm) so some may be extended, but the regulator, ASN is sure to insist on some upgrades.

Areva, EdF's partner, is possibly technically bankrupt, but for its 85% state ownership, with losses at Olkiluoto in Finland of at least Euro 3 billion and similar losses set to accrue on the two Evolutionary Pressurised Reactors (EPRs) sold to the Chinese. The UK regulatory new build team (GDA) and STUK the Finnish regulator have condemned the new control systems as being unsafe and they have to be re-designed. They have to spend further billions on the mines in Niger and Namibia in order to fuel the Chinese EPRs as part of the deal.

EdF has already stated that it will not build the UK EPRs with UK state subsidy but has asked for a platform in carbon prices which would disadvantage rival fossil fuel generators. In France it has invited E.On to share the capital cost of its reactor at Penly. And today it was announced that EdF and E.On have swapped assets in France and Germany to reduce their debt.(2) No earnings will arise from new UK reactors until at least 2018 and perhaps later due to possible delays with the Control and Instrumentation systems.

If EdF pull out of new build in the UK, Centrica's 20 percent stake would become worthless due to the age of the remaining AGR reactors such as Hinkley Point B. Centrica owns British Gas.

Another issue the companies have to deal with is that the Government has indicated the fixed price they must pay to the government for decommissioning and long term nuclear waste management is much higher than the companies expected. So discussions are probably very tense on the subject.

Jim Duffy from Stop Hinkley said: "Finances are very tight for the nuclear companies who plan to build in the west-country. It's hard to see where their money will come from for these expensive projects while they have big commitments in their home countries. As EdF were hoping to get a twenty percent price rise in French electricity prices they seem to have been much too overconfident. Perhaps they also quietly expect the UK government will in due course bale them out in the same way. I don't think the public would stand for a 20 percent energy price rise for the dubious privelege of having nuclear reactors installed with all their other risks taken into account."

Jim Duffy
Stop Hinkley Coordinator
www.stophinkley.org
07798 666756

Notes:
(1) New UK nuclear build?

Adam Smith Institute, Friday, 02 October 2009 06:02
3 Comments and 0 Reactions
Events over the last few days have dented the prospects for UK new nuclear-build.

In Germany, the success of the CDU/CSU and FDP coalition has been welcomed by the markets. The shares of both E.On and RWE have rallied in the expectation that Germany’s controversial nuclear phase-out policy will be abolished – thereby massively boosting their free cash flow. Such a reversal does not mean that new nuclear-build will be undertaken in Germany.

It would mean, though, that both companies, along with EnBW and Vattenfall, could extend the lives of their nuclear plants whose capacity exceeds 20,000 MW. Furthermore, both E.On and RWE may well undertake investment at their existing nuclear plants to boost output. Against this background, their interest in participating in UK new nuclear-build may wane. And, in E.On’s case, with net debt of c£40 billion, reducing capex – rather than increasing it – is the compelling priority.

The UK Government’s new nuclear-build hopes also centre around EdF, which is 84% owned by the French Government. EdF has just confirmed the appointment of a new Chairman, Henri Proglio, who has spent most of his career at Veolia Environnement: he will now be top of DECC’s must-meet list. Central to his new responsibilities will be the reduction of EdF’s burgeoning net debt, which presumably will involve reversing some of the ambitious international expansion of late. The sale of some UK electricity distribution assets is anticipated.

Consequently, EdF’s hitherto robust commitment to new nuclear-build in the UK may erode. After all, it will not yield any revenues until 2018 at the earliest. Add to that, the more general weakness of oil and gas prices – at least compared with the boom times in 2007/08 when new nuclear-build interest peaked – and it is no surprise that the UK new nuclear-build programme is wobbling.

Is this unduly pessimistic?

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Showing 3 of 3 Comments

ArseneKnows 1 hour ago
Not particularly pessimistic at all, certainly in the case of E.On and RWE, whose commitment to UK new build in private is far less, I suspect, than EdF's. Given the state of their respective balance sheets and the seemingly impossible task of accurately predicting how much a fleet of new EPRs or AP-1000s is going to cost (not to mention the uncertainty surrounding the final figure the government will decide on for a fixed unit price to cover new build decommissioning and waste disposal), I think it's an interesting assessment. It certainly makes you wonder whether the likes of E.On's public pronouncement's on nuclear new build are at odds with the reality of situation they currently find themselves in. Out of the three, the most wedded to the principle of new nuclear is EdF and it would be a hugely embarrassing turn around for them to even contemplate the possibility of scaling back plans for the UK. That said, when you're dealing with a company whose ex-CEO's simple solution to their spiralling debt problem was to try and raise French retail electricity prices by 20%, I guess nothing's impossible...

(2) EdF / E.On Asset swap

EDF and E.ON, Germany’s largest utility, agreed to swap assets to cut debt and meet antitrust regulations. E.ON will get the 35 percent it doesn’t own in French energy supplier SNET and rights to 800 megawatts of nuclear output, in return for giving up 1,215 megawatts of atomic and coal-fired generation in Germany.

Bloomberg 1st Oct 2009

http://www.bloomberg.com/apps/news?pid=20601085&sid=aF5...R9jaQ