The 8.5-billion euro French nuclear giant Areva, which is awaiting the rules so that it can ink a deal to supply two 1,600 MW reactors to Nuclear Power Corporation of India Limited (NPCIL), going up to an eventual six, estimates 358 new nuclear plants are likely to come up in the next two decades in more than 30 countries, apart from the 190 that will see significant revamps to extend their working lifetaking into account the 262 that will be closed after their useful life is over, global nuclear capacity will rise from 373 GW right now to 659 GW in 2030. Given the huge investment that Areva will need to make to satisfy this demand (it has an orderbook of 43.3 billion euro), including that in mining, enrichment and making the fuel, the company has invested around 10 billion euros in the fuels business over the last few yearshalf of this is in setting up enrichment facilities in the US and France. It has sold off its transmission and distribution business, as well as minority shares in various companies to get around 5 billion euros in revenues and, apart from French electric utility EDF which is likely to invest in its fresh equity, Areva is also looking at selling a 5% stake each to Mitsubishi (which makes nuclear plants) and to two middle eastern oil major countries (Areva doesnt say who) that are looking for good investments in the post-oil world.
And thats not all. A good place to visit, to see this first-hand, is the Finnish headquarters at Olkiluoto, of Tvo, to whom Areva is selling its 16-storey high EPR reactorTVOs two existing reactors supply a sixth of Finlands power and a fourth is also planned on the 1,000 hectare island after the Areva one is completed. Since this is the same reactor that India plans to buy, Areva sponsored a 4-day trip to Paris and Olkiluoto for journalists, including yours truly. The plan was to dispel doubts about EPR, but what emerged was a lot more. But first, a bit about the EPR reactors, 20 of which are in the works across the globe.
For one, while the initial two Indian reactors will have a 40% local content, including the plants erection costs, this will rise to 70% by the fifth and sixth plants. EPR reactors are designed to deliver 10% more plant availability thanks to lower maintenance needs, require 15% less fuel and 20% less O&M costs than other third generation reactors according to Areva. Post 9/11, the plant is designed to withstand an aircraft crashing into the dome; it has a special area to collect the residue in case of a 3-Mile type accident where the core melts; and an extra inner-lining of steel across the reactor to ensure that, in case there is any trouble in the reactor (as in Chernobyl), this does not travel outside.
As for the controversy over it being 100% over cost and time estimates, Areva has an arbitration case against TVO asking it to pay for the delays it caused. While Areva doesnt envisage this with NPCIL, which is an experienced nuclear company and will be able to make its case before the regulator better than TVO did, it points out the time taken in EPRs after TVO have come down dramaticallywhile the steam generators for Olkilouto 3 took four years to make, those for Flamville 3 in France took 30% less and Taishan in China took just two years. Careful contracting to avoid any TVO-type mishaps, whether Areva was to blame or not, is something NPCIL is looking at closely.
As per the schedule, the NPCIL plant is to come up in 55 months after the deal is inked, planned to coincide with President Sarkozys visit in December. But since the plant has not even been submitted to the atomic energy regulator, it is likely what will be signed during the Sarkozy visit is some sort of a framework agreement. While Areva does not categorically state what happens to fuel supplies in case India decides to test again as the decision will then be at the government level, what helps is that 35-40% of the companys revenues come from the fuel business, so the company has a big reason to want to continue suppliesit has also proposed a JV with NPCIL for the fuels business.
So who is TVO For one, it is not a Finnish government entity. It is owned by a combination of industry giants (paper mills, for instance, who are looking for the kind of steady electricity prices only nuclear can provide and which are comparable with the price of power from clean coal), various municipalities in Finland, and even private equity investors! Nor is this restricted to TVO. Another nuclear plant, Fennovoima in Finland is 34% owned by a German power utility and the rest by 48 regional and local energy companies and 15 industrial firms. Several of the plants in the 30 new countries setting up capacity are likely to be structured the same way.
Keep that in mind while India comes up with the rules that determine whether the Arevas, GEs or Westinghouses come in to set up power plants.