Saturday, March 1, 2008

Great Britain joins GNEP

Decision follows the UK's commitment to a new nuclear building program

Reuters reports that the U.K. has signed up to become the 21st member of the Global Nuclear Energy Partnership (GNEP) and without very much political fanfare to accompany it. When Canada and Australia proposed to get involved with the international nuclear fuel management consortium, the domestic fireworks in both countries flashed across the political landscape in both countries like a comet. These controversies were called "short comets," the swiftest of comets, caused by their small orbits.

By comparison there was almost no domestic opposition to the move in the UK. There Industry minister John Hutton said the purpose of GNEP is to distribute the benefits of nuclear energy without the risks of nuclear weapons.

"The UK shares in the vision of improved non-proliferation and nuclear waste management and recognizes the real benefits of initiatives such as GNEP. With a new generation of nuclear energy now set to be part of the UK's future energy mix, the UK is in position to play a role in this global initiative."

Reuters reports the government is in talks with Europe's largest utilities about building a new generation of nuclear energy plants in the country. Hutton is expected to meet US companies interested bidding on the new plants. The arrangements for the industry contacts are taking palce outside of the usual government channels, but U.S. Secretary of Energy Samuel Bodman took a victory lap over the U.K. signing on to GNEP.

"This important addition provides great momentum for GNEP and will help advance its important goals of expanding clean, safe nuclear power development while reducing the risk of nuclear proliferation," U.S. Energy Secretary Samuel Bodman said in a statement.

Bodman also noted that the move to join GNEP follows the UK’s recent decision to invite companies to submit plans for constructing and operating new nuclear power plants in the region as a way to address increasing electricity demand. Nobody seems to be saying it, but it looks like U.S. firms could benefit now that the UK is inside the GNEP tent.

The results with other nations have been mixed. Last Fall there were political fireworks in Canada as that country joined GNEP and Australia's PM John Howard, who bet the ranch on his relationship with President Bush and GNEP, lost the election and was booted out of office.

Italy, where nuclear power has been outlawed since the late 1980s, joined last November. Italy is considering overturning its ban on nuclear energy.

South Africa took a pass on GNEP even though it is now planning to acquire a massive fleet of nuclear reactors to solve its problems with electricity brownouts that have shut down major sectors of its economy.

While the UK and other countries were rallying to the GNEP program to manage nuclear fuel on a global basis, Germany is proposing a nuclear fuel program of its own despite the current government's domestic political hostility to nuclear energy.

What it boils down to is the GNEP is indeed a global nuclear fuel program. For the most part the easy customers have signed up. Hard cases like Iran, which if it had peaceful intentions for its nuclear program, would be an obvious prospect. Iran's efforts are going the other way, and the apocalyptic religious fervor of its current leadership will likely lead to ruin. How far remains to be seen.

Italy may lift ban on nuclear energy

Expectations vary whether Italy will have a change of heart?

Right-wing leader Silvio Berlusconi, whose coalition is seen winning a general election in April, is pushing to reintroduce nuclear power in Italy, according to a report in the daily La Repubblica. Italy banned the use of nuclear power after a referendum held in 1987. The country seems headed for a change of heart on the issue, but caution is advised. Italy is a country that moves governments in-and -out of power the way a screenwriter creates and dispenses with characters in a romantic movie about love under the Tuscan sun.

Enthusiasm for the new nuclear power plant varies. Berlusconi believes that the country could take as little as five years to build nuclear plants, the newspaper said. However Leonardo Maugeri, Eni's director for strategy and development, said it could take at least 10 years.

Politicans are always more optimistic than engineers. Ten years seems about right given the country is making a cold start. They'll need help and at least that's being recognized. The newspaper said that a Berlusconi government would ask ENEL to intensify international cooperation in nuclear power.

The Uranium Information Center (UIC) has a long and detailed profile of Italy's experience with nuclear energy. UIC notes that following a referendum in November 1987, provoked by the Chernobyl accident 18 months earlier, work on Italy's nuclear program was stopped. In 1988 the government halted all nuclear construction, shut the remaining reactors and decommissioned them. It is a paradox that the country took that action since it was an early adopter in the pursuit of a civil nuclear energy program.

However, despite its ban on nuclear energy, Italy hasn't been shy about buying electricity from other country's nuclear reactors. UIC reports that in November 2007 an agreement was signed confirming the 12.5% ENEL investment in Flamanville - expected to cost EUR 450 million - plus the same share of another five such plants. The agreement also gives EdF an option to participate in construction and operation of future ENEL nuclear power plants in Italy or elsewhere in Europe and the Mediterranean.

Canada posts the "for sale" sign at AECL

Is the reactor group a marketable item?

The future of Atomic Energy Canada Limited (AECL), a crown corporation, is in a state of flux according to a series of terrific news reports by the Globe & Mail. The newspaper reports that the government of Canada has put a "for sale" sign out on the nuclear energy organization which has been in business as a state-owned entity since 1952. Before the government can complete the sale of all or part of AECL it must finish the design and regulatory certification of AECL's new ACR1000 nuclear reactor. If it doesn't then AECL will find itself behind the eight-ball.

Investors are not going to buy shares in a reactor technology that isn't finished and can't be sold either in Canada or for export. To this end last week the Harper government announced a one-time cash infusion of $300M to finish the reactor's design and get it approved for sale. Complicating the situation is the incredible controversy over AECL's Chalk River isotope operation which was shut down last November and resulted in the firing of both the CEO and the head of the government's nuclear regulatory agency. Although the Chalk River nuclear plant and the ACR1000 have little to do with each other, and are managed at separate sites, their destiny is intertwined because of public perceptions of the credibility of AECL.

Is the "For Sale" sign out or not?

According to the Globe & Mail in a report published Feb 25, the Harper government wants to sell all or at least a majority interest in shares to other nuclear energy firms including Areva, General Electric, and SNC-Lavin Group. To do that they must have something to sell and the top item on the shelf is AECL's new ACR1000 reactor. The Chalk River plant is likely to remain in government hands.

Until last Fall the Canadian Nuclear Safety Commission (CNSC) was refusing to review the reactor's design because there were no sales contracts in place. Then the Harper government got an opportunity dropped in its lap that open the door to removing that obstacle. It is complicated, but the firing of Linda Keen, then director of the agency, over the closure of AECL's isotope reactor at Chalk River, also ended the agency's obstruction of the design process.

What happened at Chalk River is that AECL told the regulators it has completed the installation of secondary emergency pumps and electrical systems for the aging reactor complex. In fact the work was only partially complete. When Keen found out she took action to close the rector and also set off an international crisis over the supply of short-lived medical isotopes worldwide.

The Harper government, which had not been consulted before Keen took action, fired her and also rammed through a parliamentary action that reopened the reactor and restored the supply of medical isotopes. In mid-February this year AECL's new CEO Hugh MacDiarmid told the Harper government CNSC and AECL were now on track to complete the ACR1000 reactor design and its regulatory approval process.

The actions come just in time with reactor sales pending in Canada at Ontario and New Brunswick provinces and a deal with the Russians for export of nuclear technologies. Steve Alpin, a Canadian energy analyst, thinks the South Korean nuclear establishment could give AECL a run for its money for these reactor projects. AECL is not deterred by this competitive threat and says the first ACR1000 is expected to be built and operational in Canada by 2014.

The Globe & Mail reports there are three scenarios for the sale of AECL now that the new reactor moving forward.
  • Status quo - keep AECL as a crown corporation and spend funds up to half a billion annually to support it
  • Sell it - offer a majority stake to investors globally
  • Public/Private deal - sell shares to raise capital to build reactors in Canada and for export.

Not everyone thinks any of these scenarios are worth doing. Environmental group like Greenpeace are quoted by the newspaper as calling AECL a "money sucking black hole," and it that isn't hostile enough for you there is also the competitive issue of whether AECL can sell its CANDU heavy water design in a world of PWRs.

Competition for Chalk River's market share

At the University of Missouri, one of the largest university research reactors in the U.S., Ralph Butler, the director, is taking dead aim at AECL's reactor. According to news reports published in the Globe & Mail Feb 26, a $40 million expansion is planned for the Missouri reactor to position it as the premier supplier of medical isotopes to the U.S. market. Currently, Nordian has 65% of the U.S. market with isotopes produced at Chalk River.

Butler told the newspaper the "painful experience" of Chalk River's shutdown last November was an object lesson in the need for a reliable U.S. supply of molybdenum-99 and other isotopes. If he can complete the financing and regulatory approvals, Butler plans to produce enough product to supply 50% of the U.S. market which would chew up all but 15% of Chalk River's U.S. market share. The U.S. medical community is reportedly behind him. Last Fall the National Academy of Sciences issued a report that said the U.S. must have its own facilities to create critical isotopes.

So what is AECL's future?

Chalk River is a specialty reactor and its future isn't going to substantially influence AECL's position as a government-owned entity or as a stand-alone corporation owned and operated by a consortium of international investors. The most likely scenario for AECL is that the government will offer shares to investors to raise capital and provide support for exports. The government will likely continue to own at least a minority share of the organization and provide funds for R&D to enhance reactor technologies. The growth in the market for new reactors worldwide supports this scenario. If AECL can makes sales in Ontario and New Brunswick for the new ACR1000 twin units, its export potential will likely also be realized over the long term.

Friday, February 29, 2008

Gwyneth Cravens in Idaho Falls March 19

The Partnership for Science and Technology in association with the Idaho Section of the American Nuclear Society present a dinner- lecture Event;

Featuring: Gwyneth Cravens

Author of POWER TO SAVE THE WORLD, The Truth About Nuclear Energy

March 19th 7:00 pm Red Lion Convention Center

Cravens interviewed on televion

Sunday, February 24, 2008

French pulse public on Areva's investor relations

Merger with Alstom or Siemens looks less likely
[Updates 02/25/08; 03/01/08]
With all the new business Areva is bringing in, the state-owned firm is finding it needs to get out from under the constraints of government funding.

Reuters reports French Economy Minister Christine Lagarde has concluded that a partial listing of Areva's stock for sale to investors would be more popular with public opinion than merging the state-owned nuclear reactor maker with Alstom according to French language weekly magazine Challenges. Alstom makes turbines and other large components used in Areva's nuclear power plants. Reuters also reported that Challenges did not cite any sources in saying Lagarde would submit a report on the future of Areva to Prime Minister Francois Fillon in the next few days. So far it hasn't shown up.

"A merger with Alstom, as appealing as it is, is politically difficult to sell. According to (Lagarde's office), opening the (Areva's) capital to several big shareholders or a market listing would hurt opinion less," Challenges said. In a related report the idea of merging state-controlled nuclear energy giant Areva with engineering group Alstom seems to be losing political supporters, Les Echos reported.

Officially, the government has made no choice and the merger is still one of two options on the table for Areva, the other one being an opening up of Areva's capital to provide the company with greater resources of its own, the preference of CEO Anne Lauvergeon, the business daily said. However, there are some signs that the merger has fewer supporters within the public authorities, as the deal would be 'very complicated to implement'. There is debate about what parts of Areva's operations should remain under state control for national security reasons, the report said.

French President Nicolas Sarkozy called last year for a review of Areva's future as high oil prices stoke up worldwide demand for civil nuclear power reactors. Areva's chief executive, Anne Lauvergeon, seen as close to Sarkozy, has been pressing hard for more funds to compete with U.S. and Russian rivals. She reportedly wants at least $5 billion for these initiatives.

Areva's desire to remain independent faces a serious challenge from industrial group Bouygues, which is the biggest shareholder in heavy engineering firm Alstom, whose chief executive Patrick Kron also has Sarkozy's ear according to Reuters. CEO Lauvergeon has rejected a merger on the ground that it would endanger Areva's business model. She said the firm needs capital to grow, and it wants to set its own financial destiny with investors.

Areva seeks U.S. market share

While Areva was submitting bids in South Africa for a fleet of 12 EPRs, a consortium in the U.S. was also advancing the company's interests. Unistar Nuclear Energy, a joint venture between Constellation Energy Group Inc. (NYSE:CEG) and the EDF Group, began negotiations with a consortium led by Areva and Bechtel Group Inc. to develop plans that will form the basis of Unistar's proposed fleet of at least four nuclear power plants in the U.S.

Constellation said the NRC accepted for detailed review Unistar's partial combined license application for a proposed third reactor in Maryland. Unistar said it plans to submit the remaining portions of the combined license application in March.

Update 02/25/08

Reuters reports a sale by German engineering group Siemens of its stake in Areva is not currently on the agenda, France's Economy Minister said in an interview. "This is not an issue today," Christine Lagarde told daily Les Echos.

Siemens owns 33 percent of Areva NP which makes nuclear turbines. The balance is held by its parent Areva. "It will be important for us to know the strategic orientations of our main European partner in terms of energy," Lagarde added. Germany wants to get rid of its nuclear power plants which is an obvious conflict with Areva's global export strategy.

Update 03/01/08

The French government has postponed a decision on privatization of Areva in whole or part until much later in 2008 according to a report in the London-based Financial Times. The FT also reported;

"Areva had a 14.5% increase in annual net profits to €743m ($1.1bn), on sales up 9.8 per cent to €11.9bn, and unveiled a plan to almost double annual investment from €1.2bn to €2.2bn a year between 2008 and 2012. The revival of interest in nuclear power has also given it the confidence to set a sales target of more than €20bn for the end of the period. While some of the targeted investment could be funded through debt and cash flow, most would have to come from a capital increase."

Energy index charts nuclear industry progress

You can't tell the players without a scorecard

The revival of the nuclear industry on a global basis has generated several new developments in the financial field. These are indices and Exchange Traded Funds (ETFs) which are a basket of stocks that is bought and sold on a stock exchange as if it were a single stock.

Indices and ETFs are important tools for intelligent investing. These tools are valuable for measuring and benchmarking stocks in an industry and the industry itself provided they are not too heavily weighted to one segment of the industry. Investors who used broadly constructed and carefully measured indicies can see a wide spectrum of performance information for their stock portfolios, mutual funds, and the market overall.

Within the past year three groups have published an index on the nuclear industry and its suppliers including uranium. They are briefly described below.
-- Use IE7 for best browsing results --

Standard & Poors (S&P) Global Thematic Indices now includes the S& P Global Nuclear Index which is composed of the 24 of largest publically traded firms globally in the nuclear energy business. According to Peter Charles, an analyst at Seeking Alpha, the breakdown is 51% nuclear energy production and 49% nuclear energy materials, equipment, and services. Note that Charles has some strong opinions about the indicies, and he'll make you think, but you'll want to cast a wider net than just his review. An updated S&P Factsheet has more details about the index.

Van Eck Global launched a "Market Vectors Nuclear Energy Exchange Traded Fund (NLR) which follows the DAXglobal Nuclear Energy Index (DXNE). It consists of 38 publically traded companies in uranium mining, enrichment, nuclear power plants, and nuclear equipment suppliers. According to the firm the top 10 holdings constitute two-thirds of the index.

For this index Charles writes the breakdown is

42% uranium mining,
26% plant infrastructure,
24% nuclear power generation,
5% uranium storage,
2% uranium enrichment,
1% nuclear fuel transport.

The World Nuclear Association Index (WNAI) will launch next month a new nuclear energy index in association with S-Network LLC. It will be composed of 66 global nuclear energy companies. The index hasn't launched yet so the symbol WNAI won't show up on Yahoo or Google financial websites. However, WNA is simulating the index in dollars and euros using Quotemedia. A fact sheet lists the top ten holdings. According to WNA the breakdown of its index includes;

Reactor vendors; 4 firms (15%)
Construction; 8 firms (15%)
Nuclear fuels; 9 firms (20%)
Power Generation; 15 firms (25%)
Technology, equipment & services; 30 firms (25%)

Thinking about nuclear energy indexes

Each of these indexes have strengths and weaknesses which the investor will have to evaluate before relying on them. Their respective web sites have a wealth of information including fact sheets, a description of the methodologies used to construct the index, lists of companies tracked, and performance numbers. You will need all of this information, and perhaps more, to develop an informed choice on which index best suits your investment objectives.

Energy advice for the next President

Former USGS Director says nuclear is the way to go

The former head of the U.S. Geological Survey (USGS) has written an opinion essay in the Houston Chronicle with advice on energy policy for the next president. Publishing his views in the heart of the Texas oil industry, Charles Groat writes, "The next president of the United States can strike an early blow for sound energy policy by actively promoting our increased use of nuclear power."

That's an interesting perspective coming from a former high level government scientist who during his tenure probably had more contact with the oil & gas industry than uranium miners. Given that Houston's landscape is defined by oil refineries, these are brave words in support of a different fuel source. Groat is now in a leadership position related to energy studies at the University of Texas - Austin. Let's hope his advice will be listened to.

Here are a few highlights . . .

"Once the bane of environmentalists, nuclear power is now touted as one of the best green alternatives to coal and natural gas for electricity generation. Today, coal and natural gas generate 70 percent of U.S. electricity. By dramatically increasing nuclear power from its present share of 20 percent of our electricity generation, we have the chance to reduce reliance on fossil fuels and decrease emissions of greenhouse gases."

* * *

"The concern getting the most political mileage is the waste issue. Deep geologic disposal has been accepted by virtually all nations as the ultimate resting place for their spent nuclear fuel or reprocessing residues. The United States has led the world in committing to a site for its waste and preparing it for licensing. We have also set records for throwing unnecessary obstacles in the way of readying the site for use. Yucca Mountain, Nevada, the proposed site for retrievable storage of U.S. high-level nuclear waste, has been studied in great detail. It is a technically sound site. But the Nevada congressional delegation, overcome by NIMBY (not in my backyard) sickness, has allied in opposition to the site with environmental interests seeking reasons to stall nuclear power."

* * *

"Our next president and our country should learn from the French and take comfort in the fact that nuclear power has lived up to its potential in this large and modern nation."

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