Areva's EPR for Finland will be late

Start-up delayed from 2009 to 2011

Reuters reports the Areva EPR being built in Finland will come on line two years late.

French nuclear group Areva, Bouygues, and Germany's Siemens are building the Olkiluoto 3 reactor on Finland's west coast. It is the first new reactor to be built in Europe in more than a decade. Progress with the plant is being closely watched by European Union member states who are cautious about getting into new nuclear projects or, like Germany, oppose them altogether.

The EU3 billion ($4.4 billion) project experienced delays last winter. At the time Areva blamed the delays on problems with suppliers not understanding the specifications for concrete for the containment building and with overly detailed reviews by Finnish government nuclear regulators. Both of these problems have since been resolved. Areva did not say what the new schedule delay would translate into in terms of costs. It will likely be substantial and measured in hundreds of $millions.

The start-up of Finland's fifth nuclear power reactor is seen as a test case for Europe's nuclear future. The delay is a significant setback for Areva's marketing efforts for the new reactor design. Areva plans to build similar reactors for customers who have already signed deals. In the U.S. Constellation Energy wants to build a fleet of standardized EPRs. China just inked a deal for two of them last month.

The reactor is Areva's flagship product and these problems could impact future sales and the net worth of the firm itself. The problems with the reactor may impact the valuation of shares of the French state-owned nuclear corporation if or when the government offers them to investors in 2008.

Finland needs the new nuclear reactor to be generating electricity as soon as possible. Finland has no coal, oil, or natural gas deposits. It is poor in terms of indigenous energy reserves like hydropower. As a result, the country imports 44% of its energy sources.

The country currently imports electricity from Russia. Both countries are facing electricity shortages. The longer it takes to complete the reactor, the more exposure Finland has to Russia's problems with its own nuclear build program to close the supply gap in electricity generation.

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