Saturday, November 24, 2007

Sarkozy to close Areva's China deal

Areva here, there, everywhere

French President Nicolas Sarkozy is visiting China this week and is expected to sign several major trade deals for French companies to do business there including Airbus and Areva (EPA:CEI) The three-day state visit is expected to net Areva a deal for two nuclear reactors and a nuclear fuel facility.

Areva's CEO Anne Lauvergeon told Reuters, "China is very important to us." China is indeed an important market for Areva. The country plans to spend $50 billion to quadruple its installed nuclear generating capacity. A deal for two new reactors is said to be worth EU$5 billion.

If it goes to completion the deal will be the first contract for Areva's European Pressurized Reactor (EPR) with a total generating capacity for the two units of 3.2 gigawatts. Under the deal, Areva will also supply China Guangdong Nuclear Power Corp with fuel for the plants for a period of over 20 years worth EU$2.84 billion. Reportedly, the French state-owned utility EDF will finance the agreement, taking a stake of 35-40 pct in a new company to build and operate the plant. This is unusual because China usually self-finances its energy projects.

The Taishan nuclear plant in Guangdong province in southern China is planned to have six 1000 MWe class units and will be the site of Areva's two 1600 MWe EPR units which are expected to be online by 2013. Last year Areva thought the China deal was in the bag, but for still unexplained reasons China awarded Westinghouse a deal in December 2006 for four reactors leaving the French firm out in the cold. China also, at the last minute, switched the sites for the proposed Areva reactors.

Efforts to rekindle the deal in February 2007 and again in July ended without a contract. The delay in summer 2007 was reportedly caused by Chinese nuclear officials having second thoughts about Areva's EPR due to the extra costs of the Olkiluoto 3 EPR under construction in Finland. Areva also had problems last winter with regulatory agencies in Finland which have since been resolved.

So it must come as a relief to have France's head of state carry water for the company. It would be next to impossible for the Chinese government to decide again not to sign a contract. Too much is riding on the outcome of Sarkozy's visit.

The current deal is seen as a strategic move by China to play off the French firm against two other suppliers of nuclear reactors. Russia and the U.S. have deals in place to provide a total of six reactors. Other experts see the deal as a message from China that there is no favored supplier of nuclear reactors.

In July 2007 China closed a deal with Westinghouse, now owned by Toshiba, for four AP1000 nuclear reactors. The new Westinghouse plants are to be built in pairs in the eastern cities of Sanmen in Zhejiang province and Haiyang in Shandong province, both rapidly growing areas. Construction is to start in 2009 and reactors are scheduled to come on line between 2013 and 2015.

Last month China closed a deal with Russia's state run atomic energy export firm for two new reactors at the Tianwan Nuclear Power Plant in Lianyungang City, Jiangsu Province.

Euros not dollars will seal the deal

Reuters reports that China will pay euros for two nuclear power plants made by Areva. This is the first time a deal of this magnitude with China is being done in a single European currency. The French newspaper Le Figaro reported that the deal with Guangdong Nuclear Power Corp will be denominated in euros rather than dollars. The news comes as speculation increased China is modifying the composition of its $1.4 trillion worth of foreign exchange and concerns about the sliding US dollar. The Chinese central bank reportedly denied that China was backing off of the dollar. Reuters reported that Chinese central bank officials said they want to see a strong US dollar.

Sarkozy is Areva's top salesman

The International Herald Tribune reports that French President Nicolas Sarkozy is burning up lots of jet fuel traveling globally to promote Areva's reactors to countries that want nuclear energy. Since last January Sarkozy has been to nearly a dozen Mediterranean and Arab countries to conquer new markets. Increased concerns about global warming are driving interest in nuclear energy. His view, as reported by the French press, is that if France doesn't sell reactors to these countries, the Russians will.

While Sarkozy is helping Areva's marketing department, the firm's CEO is moving into regulatory affairs. Speaking to the World Energy Congress on Nov 12th, Anne Lauvergeon called for international coordination on the licensing of of new nuclear projects. She said country-by-country licensing was slowing down development of nuclear energy.

"The licensing process is long. We're in a system where we have to re-license every time we want to start a new project. We have to start from scratch with every country."

She said a fast track process could be established if there is international cooperation on what's really needed to license a reactor. In Europe Area has to spin up a new licensing effort for each reactor with specific, costly requirements in each country.

Areva waits for India deal with US

While Areva's prospects in China are looking up, the outlook is not so bright in India. The on-again/off-again deal between the U.S and India creates an uncertain outlook for the French firm being able to enter that market. India has set a target of 20,000 megawatts of nuclear power by 2020. and will need international nuclear technology and construction methods to realize the goal. This creates a political conflict within the country where some government officials in charge of nuclear energy are wary of becoming too dependent on outside expertise.

Areva wants a shot at India's "ultra mega facilities." The firm is in talks with Indian firms to develop nuclear power projects in India, said Philippe Guillemot, an executive with Areva. Guillemot said Areva was waiting for a landmark nuclear technology deal between India and the U.S. to be finalized before forging any new ventures. The deal also has to be approved by the 45-nations Nuclear Suppliers Group and the International Atomic Energy Agency.

Areva CEO Anne Lauvergeon told the World Energy Congress earlier this month that she sees the US-India deal as being at a difficult stage despite the fact that leftist political parties in India have relented in their opposition to the negotiations. She said, "We really are in a political field. As industrialists we have to wait for the end of negotiations." She added that Areva has opened separate discussions with India's nuclear establishment.

If concluded successfully, the US-India deal would give India access to US nuclear fuel. Reportedly, India has had to shut down some of its reactors due to fuel shortages. India cannot purchase fuel from the Nuclear Suppliers Group because it has not signed the Nonproliferation Treaty. It makes no sense for India to buy reactors from Areva if they can't fuel them. India could become one of the world's major markets for nuclear reactors if it can resolve its internal political differences over foreign participation and come to terms with the demand of the Nuclear Suppliers Group to sign the nonproliferation treaty. That's a steep hill to climb and Areva may have a long wait.

Shifting sands at home for Areva

While the company was out selling its capabilities to China, developments close to home could bring profound change to the firm. Bloomberg News reports that the French state nuclear agency plans to sell 25% of Areva to pay for decommissioning of old facilities. The French Atomic Energy Commission, which owns 79% of Areva needs a reported EU$ billion to decommission old nuclear facilities. Through a variety of mechanisms the French government owns 94% of the firm.

Also, Areva needs to sell new shares to extend its uranium mining and enrichment lines of business and to pay for its expansion in new markets such as China and India. Areva also plans to build reactors in the US having signed a deal with Constellation Energy for an EPR at Calvert Cliffs which would be a model for a whole string of planned US nuclear facilities.

The sale of 25% of the firm would raise about EU$5 billion. Possible investors include Japan's Mitsubishi Heavy Industries and Germany's Sieman's which owns a 34% stake in the firm and wants to increase its position. Another option, which would keep Areva in French hands, is to develop a merger with Alstrom. Alain Bugat, the CEO of the French Atomic Energy Commission, thinks this third option is the way to go. However, he doesn't want the whole pie, just a controlling interest. Bugat told Bloomberg, "Areva should try to secure ties with a foreign partner." This way, he said the firm would be in a better position to win new contracts in various parts of the world. So it looks like there is room at the table for outside investors so long as they hold minority interests.

The results of an options study for the sale is being conducted by McKinsey and bank HSBC and is reported by AFX News to be ready for release by the first week in December. According to AFX, Areva does not want to merge with Alstrom preferring to remain independent.

Nukes OK Away, No Nukes at home?

On Oct 25th French President Nicholas Sarkozy said he opposes licensing of new nuclear plants in France even as he energetically promotes the sale of them abroad. France's main anti-nuclear group Sortir du Nucleaire issued a study at the same time calling for a phase out of all nuclear plants in France within 5-10 years. France currently gets 78% of its electricity from 58 PWRs.

The environmental group is skeptical of Sarkozy's statement on nuclear power. A spokesperson for the group reportedly said Sarkozy's call for a freeze on new nuclear plants is "decietful" because it is easy to build many reactors on existing sites. Apparently, Sarkozy's ban only related to new, greenfield sites.

The group went further and called for the cancellation to the EPR power plant and the Georges Besse II enrichment project, termination of the planned ITER fusion reactor at Cadarache, and an end to work on a deep geologic waste repository at Bure. The group boycotted a national dialog with other French environmental groups, called 'Grenelle of the Environment,' which have taken a less drastic position on the future of nuclear power in that country. It is very unlikely Sarkozy will give in to the demands of the group.

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As Sarkozy tap dances his way across the nuclear energy landscape, it is clear he is bent on promoting Areva's international interests and is not planning to undercut the nation's dependence on nuclear power at home. The long sought China deal appears to be within his grasp and prospects abound for deals in other countries. He'll need to balance how much he time he devotes to his international goals with attention on the home front.

Wednesday, November 21, 2007

Book Review - The Power to Save the World

One nuclear reactor at a time
[Updates 12/07/07. 12/21/07]

Over at the Atomic Insights blog, run by Rod Adams out of Annapolis, MD, there is a good place to start if you want to read about how people come to realize that nuclear energy has a place in the mix to address global warming.

Rod has a post on the a book review by Spencer Reiss, who often writes about energy for Wired Magazine, and who published a review of Gwyneth Cravens's book Power to Save the World: The Truth About Nuclear Energy in the November 20, 2007 edition of the Wall Street Journal.

Here are the first three paragraphs of the WSJ book review or you can hit one of the URLs above for Rod's post or the full review.

* * *

Green with (Nuclear) Energy
November 20, 2007; Page D8, The Wall Street Journal

Start with a novelist and former New Yorker magazine fiction editor living on the East End of Long Island, a sometime antinuclear activist (remember Shoreham?) and a determined organic vegetable gardener who spent her childhood in 1950s New Mexico having atom-bomb nightmares. Team her with another lifelong greenie, a man with a doctorate in organic chemistry who grew up on an Idaho ranch without electricity and whose day job, over the course of a long career, has included pioneering something called probabilistic risk assessment (the underpinnings of climate-change analysis, but that's another story). Send the pair off on a grand tour of the nuclear-power world, from dust-blown uranium mines to the depths of a pilot facility for Uncle Sam's waste deposit at Nevada's Yucca Mountain. And then wait for them to come back with the predictable diatribe against nuclear power.

Happily, you'll wait in vain. "Power to Save the World" is a picaresque, flat-out love song to the bad boy of the great American energy debate -- as good a book as we're likely to get on a subject mired in political incorrectness, general unfathomability and essentially limitless gut fears. It's also the latest plot point for one of the few unassailably positive byproducts of global-warming mania: the quiet emergence of pro-nuke greens, led by such impeccable apostates as Whole Earth founder Stewart Brand and James Lovelock, the British chemist best known for his Earth-is-a-living-organism "Gaia hypothesis."

Gwyneth Cravens and her Virgil -- retired Sandia National Labs scientist D. Richard "Rip" Anderson, arguably the world's top expert on long-term disposal of nuclear waste -- are smart enough to steer clear of that fratricidal battlefield, which features some of the worst aspects of know-nothing environmentalism. The book's subtitle -- "The Truth About Nuclear Energy" -- could come straight off some forlorn industry-group handout. That's not meant as criticism.

* * *

Update 12/07/07 - Hat tip to Eric McErlain at NEI's blog

In the midst of promoting her new book, The Power to Save the World: The Truth About Nuclear Energy, Gwyneth Cravens sat down for an interview with Wired News. Her conclusion? Every day spent burning coal for power translates into damaged lungs and ecosystem destruction. If the world wants to keep plugging in big-screen TVs and iPods, it needs a steady source of power. Wind and solar can't produce the "base-load" (or everyday) steady supply needed, and the only realistic -- and safe -- alternative is nuclear.

Update 12/21/07

Ms. Cravens will be a featured speaker here in Idaho Falls, ID, in March 2008 according to an announcement from the Partnership for Science & Technology. Lane Allgood, Executive Director of PST, told a community business meeting today his group is working to schedule the talk with the author. A March 2008 date for the event will be announced in January. BTW: D. Richard "Rip" Anderson, Craven's guide to the nuclear world, is an Idaho Falls native.

Tuesday, November 20, 2007

DeVore Pulls the Plug

No nuclear initiative for California in 2008

Assemblyman Chuck DeVore pulled the plug this week on his quixotic quest to put an initiated referendum on the California ballot by June 2008 that would, if passed, have overturned the state's three decades old ban on new nuclear power plants.

Reuters reports that he canceled the effort because he did not get enough signatures to put the measure to a vote. In fact, he never collected any signatures at all. Political analysts told him that a 10% spread between pro-and-anti-nuclear sentiments was not enough to justify spending millions on signature collection and the election.

Despite considerable bravado, it looks like Chuck just could not get up the head of steam he needed to make it to the station. California's ban on new nuclear power plants, now more than 30 years along, will continue. It guarantees that the lights will stay on in Los Angeles and other California cities through the help of coal-fired power plants.

DeVore, a Republican from a conservative political district in Orange County, claims opponents of nuclear power are ignoring the fact that it does not emit greenhouse gases that cause global warming and that the state won't meet its ambitious renewable power generation goals and greenhouse gas emission reductions without it.

His opponents including Dan Hirsch, president of the Committee to Bridge the Gap, disagree. In a predictable and ecstatic outburst of rhetoric pitchforking the politically dead effort, Hirsch said,

"Nuclear power is the most dangerous technology on earth, with risks of meltdowns, terrorist attack, proliferation, and leaking long-lived wastes. This humiliating reversal for a proposed initiative to revive it in California is a great victory for common sense. Now the state can focus on safe and sensible renewable solutions to global warming."

Maybe that will be true for California, but elsewhere things are different. U.S. nuclear power builders say by the end of 2009 they will file for 32 new nuclear power reactors, most of them on existing plant sites in the U.S. Southeast and Texas. None will be in the West and certainly not in the Golden State.