Friday, December 10, 2010

Money flows for nuclear energy

Areva gets stake from sovereign wealth and House adds to loan guarantees

raising_capitalMoney is flowing to new nuclear projects. French state-owned nuclear giant Areva announced that Kuwait will take a 4.8% stake in the firm worth $795 million.

The Wall Street Journal reported French Finance Minister Christine Lagarde made the announcement in Paris.

At the same time, Lagarde also said the French government would invest an additional $396 million. Finally, Areva will raise cash from the sale of subsidiary in the electronics industry.

Areva has been working to raise $4 billion to pay for the firm’s expansion in Europe, China, and India; and for new uranium mines. Talks have been underway with the sovereign wealth fund of Qatar and with Mitsubishi in Japan. Overall, if the firm’s financial goals are achieved, these new investments will account for a 15% share in the firm.

It may take some time for Areva to realize these goals. For instance, Qatar wants its stake to be in uranium mines rather than reactors, but Areva needs the cash to build new 1,600 MW EPRs. Internal French politics may also play a role.

Alstom, the French power generation equipment manufacturer, is opposed to having Mitsubishi take a stake in Areva. Also, EDF, which owns a 24% stake in Areva, may want to increase it to gain seat on the board. The two firms do not get along so Areva is expected to try to block this move.

If talks fail with Qatar and Mitstubishi, Areva may have to look elsewhere for funding. There is only so much money that the French government can put into the firm, given its social welfare priorities, which is why Areva is looking for external investors.

An Areva executive in the U.S. told a meeting of government officials in Washington, DC, earlier this week the firm would not have been able to commit to building its Eagle Rock Enrichment Facility in Idaho if it had not received a $2 billion Department of Energy loan guarantee.

More money for U.S. nuclear projects

standing liberty dollarIn the U.S. the House passed legislation adding $7 billion in new loan guarantees for nuclear power plants. The Department of Energy short list for them includes NRG’s South Texas Plant and Scana’s V.C. Summer Station.

The bill now goes to the Senate where the number pending there is $10 billion. A conference committee might split the difference. The Obama Administration had asked for $36 billion. Steve Kerekes, a spokesman for the Nuclear Energy Institute (NEI), told the Washington Post Dec 9 the $7 billion “works for now.”

In November Constellation walked away from negotiations with the government for a loan guarantee for its Calvert Cliffs III reactor, which was expected to be a 1,600 MW Areva EPR. The future of that project is up in the air over how it will go forward with Unistar and EDF. Another U.S. partner is needed to take a stake in it due to U.S. laws on foreign ownership of nuclear reactors.

If Unistar and EDF cannot get the Calvert Cliffs project back on track, the Department of Energy may consider offering a conditional commitment for a loan guarantee to Luminant’s Texas-based Comanche Peak project. It is unique due to its planned use of two 1,750 MW Mitsubishi APWR reactors. Dominion in Virignia has also chosen the APWR though it is reportedly looking at a 1,500 MW version.

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