Progress reported on $2 billion loan guarantee and NRC license application
An Areva executive says the Department of Energy has completed the due diligence on a $2 billion federal loan guarantee for the gas centrifuge Eagle Rock Enrichment Facility planned to be built 18 miles west of Idaho Falls, ID.
Sam Shakir (right), head of Areva Enrichments Services, told a conference call of nuclear energy bloggers Feb 5. “. . . the term sheet for a conditional commitment is ready for approval by Secretary of Energy Steven Chu.”
Shakir also said his company is midway through the licensing process and has answered all of the requests for information from the Nuclear Regulatory Commission (NRC). The agency has published a schedule that calls for issuing the license in early-to-mid 2011. In anticipation of that decision, Shakir said Areva will hire an engineering procurement contractor (EPC) in the third quarter of 2010 to build the $3 billion plant.
The facility is now in the engineering design phase based on the George Besse II facility (PDF file) in France. More than 250 engineers in Maryland, New Jersey, and Massachusetts are drawing up the plans to build the mammoth nuclear fuel production plant in Idaho. Areva expects to break ground in 2011 and begin commercial operations in 2014.
Demand for enriched uranium will outstrip supply
By 2018 the plant will be producing 3 million SWU for the U.S. domestic nuclear fuel market. According to Areva’s estimates, total U.S. demand for enriched uranium by 2020 will be 15 million SWU. Shakir said U.S. and international demand for nuclear fuel justifies the growth of enrichment facilities. He broke down the supply chain this way.
- 3-6 M SWU Louisiana Energy Services (Urenco), NM
- 3-6 M SWU Eagle Rock Enrichment (Areva), ID
- 3-4 M SWU American Centrifuge (USEC), OH
- 3-6 M SWU Global Laser Enrichment (GE-Hitachi), NC
Of these four plants, only the first two have the complete confidence of U.S. utilities. USEC’s technology is a work-in-progress. The laser enrichment process being developed by GE-Hitachi still have to be proven in a test loop before the company will commit to build an enrichment plant using it.
Shakir said as a result Areva has already sold $4 billion in services contracts to nuclear utilities for “an unprecedented duration of 15 years.” He added that another $1 billion in forward looking contract sales are in the works.
“These contracts are the cornerstone of the financial viability of the plant. It is why we have an investment-grade rating from Wall Street for the loan guarantee.”
He said these commitments are also clear indications that U.S. nuclear utilities are concerned about the security of their fuel supply. The Megatons-to-Megawatts program with the Russians, which supplies 50% of U.S. nuclear fuel from blended down weapons-grade uranium, expires in 2013. The Russians are already selling nuclear fuel to U.S. utilities on a commercial basis, but future demand will far outstrip current supply.
Loan guarantee is critical to success
The loan guarantee is a crucial success factor for the project. Shakir explained in Friday’s conference call that the Eagle Rock project “ . . . is a unique nuclear project which cannot be financed on the open market” without the federal loan insurance. He added that “ . . . the collapse of U.S. capital markets in 2008 makes it much more difficult.”
Jarret Adams, a spokesman for Areva, told the blogger conference call in January, “It would be difficult if not impossible for Areva to build the plant without the loan guarantee.”
Construction plans and employment opportunities
Once financing is assured, construction of the Eagle Rock plant will require about 1,000 construction workers starting in 2011. The permanent work force will be about 400 operators and engineers. Shakir estimated the economic multiplier effect of building the plant will be about 5,000 jobs nationwide through 2018 because of the size of the supply chain.
While it is too early for vendors to contact Areva about doing business with the facility, Shakir said the company plans to hold a supplier day in Idaho later in 2010, “possibly in as soon as three months,” to explain how businesses will be able to get their capabilities and catalogs into Areva’s procurement database.
Hiring for operations jobs won’t take place until 2012/2013. All open positions will be posted on Areva1s website.
Competition with USEC
Regarding Areva’s competition with USEC for the loan guarantee, last July the Department of Energy declined to award it to the company for two reasons. First, the technology needs more work before it is reliable. Second, USEC could not pass the financial due diligence review that is necessary to qualify a firm to be eligible for the loan guarantee.
In the meantime, DOE is providing USEC with $45 million to continue R&D and technology development for its American Centrifuge facility. DOE is also increasing the budget for cleanup of nuclear waste at the Portsmouth, Ohio, facility which will create jobs over the next three years.
USEC spokesperson Elizabeth Stuckle told the Columbus Dispatch Feb 2 USEC continues to work on the changes DOE recommended the company make when it didn’t award the loan guarantee last year.
“We plan to demonstrate a viable technology,” she said.
The Ohio congressional delegation has a variety of views on how USEC is doing. U.S. Rep. Jean Schmidt, a Republican, has been critical of DOE’s decision not to award the loan guarantee to USEC. The plant site is in her district.
However, U.S. Rep. Zack Space, a Democrat, is more realistic. He said DOE's R&D and cleanup funding commitments will preserve jobs in the short-term. He told the Chillicothe Gazette Feb 2, “we still have a long way to go.”
Update Feb 6, 2010
The Idaho Falls Post Register reported that a spokesperson for the Department of Energy in Washington, DC, said last week that the agency was not requesting an increase in authority to issue loan guarantees for enrichment projects. Instead, the spokesperson told the newspaper, USEC could apply for R&D money, rather than a loan guarantee, to finish development of its centrifuge technology,
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