Piv­otal project Europe’s first nuclear plant in 15 years

Areva hopes de­lay-hit Fin­nish plant’s com­ple­tion will re­deem re­gion’s first re­ac­tor in 15 years

Financial Times USA - - COMPANIES & MARKETS - ANDREW WARD — EN­ERGY ED­I­TOR

On the shores of the Baltic Sea, be­neath the big azure sky of a Nordic spring, Fin­land’s Olk­ilu­oto-3 nuclear plant looks al­most com­plete. A team of paint­ing con­trac­tors stream­ing out of the red re­ac­tor build­ing at the end of their shift are the only ex­ter­nal sign that this is still a work in progress.

Yet, as the fi­nal touches are made to western Europe’s first new nuclear power sta­tion for 15 years, its own­ers have a blunt as­sess­ment of progress.

“If the nuclear in­dus­try wants to have a fu­ture it can­not af­ford more projects like this,” says Pekka Lund­mark, chief ex­ec­u­tive of For­tum, the Fin­nish power com­pany which owns a 26 per cent stake in TVO, the con­sor­tium be­hind Olk­ilu­oto-3.

Areva, the French re­ac­tor man­u­fac­turer, be­gan build­ing Olk­ilu­oto in 2005 with a tar­get for com­ple­tion by 2009 at a cost of €3.2bn. The lat­est timetable would see it open al­most a decade late at the end of 2018 and nearly three times over bud­get at €8.5bn.

The project is the most ex­treme ex­am­ple of the de­lays and cost over­runs which have be­come com­mon­place in the nuclear in­dus­try, plung­ing re­ac­tor com­pa­nies such as Areva and Toshiba’s West­ing­house sub­sidiary into fi­nan­cial cri­sis.

Areva’s abil­ity to com­plete Olk­ilu­oto over the next year and learn les­sons from the fi­asco as it presses ahead with sim­i­lar projects in France and the UK will go a long way to de­ter­min­ing the in­dus­try’s chances of re­cov­ery.

Olk­ilu­oto is en­ter­ing a cru­cial phase with “cold func­tional test­ing”, the first op­er­a­tional tri­als of the re­ac­tor sys­tem, due to start in June. Sev­eral fur­ther im­por­tant mile­stones must be cleared in the months ahead be­fore the Fin­nish nuclear reg­u­la­tor can is­sue an oper­at­ing li­cence.

“The road to com­ple­tion is quite clear,” says Jarmo Tan­hua, TVO chief ex­ec­u­tive. “We al­ready have a full-scope [com­puter] sim­u­la­tor run­ning, so we know at least that the plant op­er­ates in the­ory. We just have to show that it also does in prac­tice.”

As well as For­tum and other smaller Fin­nish power sup­pli­ers, TVO’s own­ers in­clude sev­eral of the coun­try’s largest man­u­fac­tur­ers such as UPM, the pa­per pro­ducer, which are re­ly­ing on Olk­ilu­oto-3 for long-term en­ergy sup­ply.

This has left TVO fac­ing an awk­ward bal­anc­ing act, be­tween co-oper­at­ing with Areva to fin­ish the project while also pur­su­ing the French com­pany and its former part­ner, Siemens, for bil­lions of eu­ros of com­pen­sa­tion for the de­lays.

Talks aimed at a set­tle­ment broke down a year ago and the In­ter­na­tional Court of Ar­bi­tra­tion made a “par­tial award” last Novem­ber in favour of TVO. It has yet to rule on how much Areva and Siemens, which ex­ited the con­sor­tium in 2009, must pay.

Olk­ilu­oto li­a­bil­i­ties were among the main fac­tors that led the French gov­ern­ment to ar­range a €5bn bailout of Areva, 87 per cent owned by the state, and force it into a tie-up with EDF, the French util­ity, due to be com­pleted this year.

Re­spon­si­bil­ity for Olk­ilu­oto will re­main in a sep­a­rate “old Areva” to pro­tect state-con­trolled EDF from TVO’s com­pen­sa­tion claim, which would ulti-

‘If the nuclear in­dus­try wants to have a fu­ture it can­not af­ford more projects like this’

mately be borne by French tax­pay­ers.

The restruc­tur­ing has raised alarm in Fin­land that Areva might ne­glect Olk­ilu­oto in favour of projects at Fla­manville in France and Hink­ley Point in the UKwhich are both led by EDF.

All three projects in­volve the Euro­pean Pres­surised Re­ac­tor, tech­nol­ogy con­ceived by French and Ger­man en­gi­neers in the 1990s that was sup­posed to her­ald a new era of in­ter­na­tional growth for the French nuclear in­dus­try. In­stead, it has turned into a night­mare as con­struc­tion prob­lems, along with re­newed safety fears after the melt­down in 2011 at Ja­pan’s Fukushima nuclear plant, have com­bined to curb de­mand.

The EPR was de­signed with safety as the top pri­or­ity after the Ch­er­nobyl melt­down in Ukraine a decade ear­lier.

But ex­tra safe­guards, such as a con­crete dome over the re­ac­tor strong enough to with­stand an air­craft strike, have proved ru­inously ex­pen­sive.

The Fla­manville plant is six years late and €7bn over bud­get, with the risk of fur­ther de­lays be­yond the cur­rent 2018 open­ing tar­get as French reg­u­la­tors scru­ti­nise po­ten­tial faults with re­ac­tor com­po­nents. TVO de­clared last month that no such faults ex­isted at Olk­ilu­oto.

Two EPRs un­der con­struc­tion at Tais­han in China by state-con­trolled CGN in part­ner­ship with EDF and Areva have pro­ceeded more swiftly. One is on course to be­come the first op­er­a­tional EPR worldwide by the end of 2017, a mere four years late.

EDF and Areva are hop­ing for a smoother ex­pe­ri­ence at Hink­ley Point, where con­crete was poured for the first per­ma­nent struc­tures in March.

Dif­fi­cult parts of the con­struc­tion process have been mocked up at Hink­ley in full-scale steel and con­crete mod­els, al­low­ing en­gi­neers to prac­tise be­fore em­bark­ing on the real thing. After heavy losses else­where, EDF and Areva des­per­ately need to make money from Hink­ley’s two re­ac­tors.

The £18bn project has been crit­i­cised in Bri­tain for the £92.50 per megawatt hour price guar­an­teed to EDF for elec­tric­ity from the plant, ris­ing with in­fla­tion for 35 years — more than twice the cur­rent whole­sale price. It will only prove a good deal for EDF if it can con­trol con­struc­tion costs bet­ter than at Fla­manville and Olk­ilu­oto.

EDF has no di­rect eco­nomic in­ter­est in Olk­ilu­oto be­cause the re­ac­tor will be owned and op­er­ated by TVO.

How­ever, For­tum’s Mr Lund­mark says that com­ple­tion of the project is cru­cial to the rep­u­ta­tion of the French nuclear in­dus­try, adding: “We want to make sure that Areva has the tech­ni­cal and fi­nan­cial re­sources avail­able to suc­cess­fully de­liver what they have com­mit­ted to.”

Areva in­sists that the sale of its re­ac­tor busi­ness to EDF will have no im­pact on its abil­ity or com­mit­ment to com­plet­ing Olk­ilu­oto-3.

TVO’s Mr Tan­hua says the trauma of the past decade will even­tu­ally be for­got­ten once the plant be­gins pro­duc­ing re­li­able, low-car­bon en­ergy. “We can still be­come a flag­ship for the EPR and show there is a fu­ture for the Euro­pean nuclear in­dus­try.”

See FT Big Read

Hannu Huovila/TVO

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.