Saturday, July 10, 2010

Areva’s Besnainou updates nuclear bloggers

U.S. CEO goes live with another unscripted conference call

hot_dogThe world of corporate communications is sometimes noted more for its opaque qualities than for frank talk. The reasons are there are a multitude of legal, financial, and branding issues at work every time a CEO steps up to a microphone.

Areva’s U.S. CEO Jacques Besnainou, who is an American citizen, sometimes makes fun of his “Brooklyn accent.” In fact, his responses to questions from a group of independent bloggers come across with the satisfying snap and crunch of a Nathan’s hot dog at Coney Island.

Areva is way out in front of the rest of the nuclear industry in its use of social media. In the latest of a series of unscripted conference calls, Besnainou talked with a group of nuclear bloggers July 9 about the company’s U.S. projects. He also answered questions as they came.

Eagle Rock Enrichment Facility

Jacques Besnainou2 Areva and the Department of Energy (DOE) have signed the term sheet for the conditional commitment of a $2 billion loan guarantee for the Eagle Rock Enrichment Facility.

“We are pleased that DOE moved so quickly,” Besnainou said. (photo left)

The NRC license is expected in summer 2011 at which time the firm will break ground at a site 18 miles west of Idaho Falls, ID. The plant is expected to produce 3 million SWU by 2014. It’s output will represent about 25% of total U.S. demand.

Besnainou said Areva will announce selection of an engineering, procurement, and construction (EPC) contractor in a few months. A suppliers’ day with prospective vendors for the plant will take place in Idaho Falls, ID, in September. Information on doing business in Idaho Falls can be found at Grow Idaho Falls website.

An Areva executive on the conference call told the bloggers construction employment at the plant is expected to be about 1,000 workers between 2011-2014 and the permanent workforce will be in the range of 300-400 people.

Lane Allgood, Director of the Idaho Falls based Partnership for Science & Technology, sent this blog an email heads-up that the NRC is expected to announce a public hearing date on the draft environmental review for the plant. Allgood said he thinks it will be in mid-August.

ANL WestSeparately, Areva is working on improving the interchange to the plant on U.S. Highway 20. The State of Idaho and Areva agreed this week to spend $2 million to build a diamond shaped overpass to route traffic to-and-from the plant.

Though it is one of the most lonesome stretches of two- lane blacktop in the nation, it supports an amazing volume of traffic.

More than half the 6,000 people who work on the Arco desert at various parts of the Idaho National Laboratory travel US 20 by bus, van pool, or car.

Calvert Cliffs III

Besnainou is very excited about pending developments for Constellation’s Calvert Cliffs III reactor which will be a 1,600 MW Areva EPR. He said that the utility is in line for a DOE loan guarantee for the project this year and is getting “outstanding support” from Rep. Steny Hoyer (D-Md).

The House of Representatives passed an appropriation bill paying for the operational costs associated with granting $9 billion in loan guarantees to Constellation and two other utilities. They are expected to be NRG’s South Texas Project and Scana’s V.C. Summer Station. The legislation, which must pass soon as it funds other government projects, is now pending in the Senate.

Besnainou also praised Pres. Obama’ support for nuclear energy citing his February 16 announcement of the first award to Southern. That utility is building twin Westinghouse AP1000s.

Blue Ribbon Commission

Areva is following the deliberations of the Department of Energy’s Blue Ribbon Commission (BRC). Besnainou has previously discussed the benefits of reprocessing spent fuel and said Areva is interested in building a commercial facility for that purpose in the U.S.

In response to criticism from anti-nuclear groups who cite the risk of proliferation of weapons grade materials, Besnainou offered an odd but visually compelling metaphor. His point is that plutonium from spent nuclear fuel makes a lousy feedstock for a nuclear bomb.

marshmallow“Building a bomb from reactor grade plutonium is like making a ladder out of marshmallows. You can try to do it, but you won’t like the results.”

He also dismissed comments submitted to the BRC by an anti-nuclear group that said a reprocessing plant would result in a massive release of radiation from an accident.

Besnainou cited Areva’s experience in France.

“We will never compromise on safety.”

The BRC is holding a series of committee meetings around the country. Check the BRC’s web site for dates, times, and locations.

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Friday, July 9, 2010

Areva seeks business case for new reactor at Point Lepreau

The provincial government signs a letter of intent to build a mid-range power station

break-upFrench state-owned nuclear giant Areva signed a letter of intent with the New Brunswick provincial government July 8 to develop a signature 'clean energy park' near the Point Lepreau nuclear station.

The agreement could represent a significant break from Canada's reliance on AECL's CANDU reactor technology. Could this deal be the end of Canada’s long love affair with CANDU technology?

A unique aspect of the deal is that Areva is pitching alternatives to its 1,650 MW EPR reactor with two mid-sized designs. The two reactors are the 1,250 MW KERENA BWR and the 1,100 AT-MEA PWR.

Jacques Besnainou, Areva U.S. CEO, (left) told a conference call of nuclear bloggers July 9 both reactors have "load following" capabilities which will enable them to work well with a companion offshore wind energy farm designed to use the same 5 MW wind turbines installed by Areva at German site in the North Sea.

Jacques Besnainou2Besnainou says that if the utility can make the business case for the project, and chooses a reactor to go forward, then Areva will submit the selected design to the Canadian Nuclear Safety Commission (CNSC) for certification and a license.

"Assuming we have a good business plan, we can break ground in 2015 and have revenue from the plant by 2020."

Besnainou said the letter of intent represents "the furthest Areva has gone" with a nuclear deal that does not involve an EPR.

In response to a question, Besnainou said that completion of the detailed design for both of the Areva mid-range reactors depends on interest from a customer.

Asked how Areva could go forward with another first-of-a-kind reactor when it was still having schedule delays and cost over runs at a project to build an EPR in Finland, Besnainou said that since 2002, "the global supply chain has gotten a lot more manageable."

Asked to provide specifics, he said that pouring concrete for nuclear reactor foundations "is very complex" because of the quality requirements for the steel and the concrete. He said the lessons learned in Finland about pouring concrete are being applied to the construction of two EPRs in China. As a result the firm was able to shave a month off the schedule for pouring concrete in one the major elements of the reactor’s foundation.

Areva’s clean energy park concept grows to three

This is the third 'Clean Energy Park' announced by Areva. The other two are in Fresno, Calif., and near Piketon, OH.

In Fresno Areva plans to develop a 1,650 MW EPR reactor and a solar energy facility. The combination of nuclear and alternative energy sources will be used to generate electricity and for water treatment applications.

Besnainou said the nuclear energy source at the Ohio site will be an Areva EPR built for Duke Energy. The alternative energy options are still under review.

In Canada the park will use wind turbines. Besnainou said, "you can barely see them and the winds are very good a few miles offshore from Point Lepreau."

Financing the build?

prudent investorAsked what role Areva would have in facilitating the financing of a reactor for the New Brunswick utility, which has a significant debt load, Besnainou said Areva would play a role in arranging for financing, perhaps acting as a middleman, but would not be a direct investor in the project.

Areva isn’t the first firm to try to build a new reactor next to the existing plant. In February 2008 AECL proposed to build an ACR1000 reactor at Point Lepreau using the merchant model.

AECL said at the time it would not take an ownership stake in the project. Its partners included SNC-Lavalin Group Inc., [a construction firm], General Electric Co., Hitachi Ltd.; and, Babcock & Wilcox Co. who would retain ownership and finance the project by concluding long-term contracts with New Brunswick Power and other customers.

One of the risks for the consortium is that the provincial government asked for a fixed price contract unloading all the risk on the builders. The parties did not come to an agreement on terms and the project was abandoned later that year.

In early 2010 Hydro-Quebec proposed to buy the New Brunswick utility acquiring its significant debt and picked up the tab for the huge cost over runs for the AECL-led refurbishment of the current reactor. That deal also fell through because the financial aspects of the agreement could not be brought to closure.

Impact on AECL?

AECL SymbolThe move to do business with Areva likely throws a spanner in the works over the Ottawa central government's plans to sell AECL. This is the second time a Canadian provincial government has turned its back on AECL. Last summer the Ontario government cancelled a $20 billion deal for new reactors declining to purchase them from either AECL or Areva.

Bruce Purchase, a former deputy energy minister in Ontario, and now a professor of energy policy at Queen's University, told the Toronto Globe and Mail July 8 things look even worse for AECL. He told the newspaper there is a perception that AECL is unable to sell reactors, has fading support from the central government, and has a limited future focused on servicing the existing fleet of CANDU reactors.

Is there money on the table?

The answer to the question of whether there is money on the table depends on which consultant you talk to. Areva has its work cut out for it developing a business plan for the new reactor.

New Brunswick energy minister Jack Keir told the newspaper his government opened talks with Areva to build a merchant plant in order to sell power to New England. That business objective could make the deal work if transmission lines can be run through Maine. Much of the state is a national park and green groups are likely to raise protests over the lines and the reactor.

money_on_tableRichard Levitan, an energy consultant based on Boston, told the New Brunswick Business Journal July 8 the power from a new reactor would cost less than $0.02/kWhr to produce and could be sold for $0.07. In a region where fossil fuel generated electricity sells for as much as $0.15, a new reactor could be a money machine for its owners for 60 years.

However, another energy consultant, Gordon Weil of Standard Energy in Maine, told the newspaper there is an energy surplus in New England due to the recession. He said demand for electricity won't return to prerecession levels for at least a decade.

Steve Aplin, an energy consultant who publishes the blog 'Canadian Energy Issues' said in a comment on it July 9 that the AECL ACR1000 is "much further along" in its design review at the CNSC that either of the two Areva reactors. He added that a big challenge Areva will face is to get the Canadian government to allow the firm to close the deal.

Shawn-Patrick Stensil, a spokesperson for Greenpeace, told the Globe & Mail the agreement will never get off the ground because the money won't be found for the project. He said hydropower in Quebec will maintain a cost-competitive lead over nuclear energy. He added that Areva's cost over runs in Finland make it unlikely the reactor vendor would put up any of the money for the project in New Brunswick.

Ed Kee, a Washington, DC., energy consultant at NERA, said the provincial government might have to offer loan guarantees to attract investors to the fund new reactor. He told the Canadian Broadcasting Corp. in an extensive interview July 7, that "absent a guarantee, this looks like a pretty tough deal to do."

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Thursday, July 8, 2010

Financial aid available for nuclear studies

U.S. Department of Energy releases $18 million for undergraduate and graduate studies and improvements at research reactors

financial aidThe U.S. Department of Energy (DOE) announced July 8th the release of $18.2 million to help educate the next generation of nuclear scientists and engineers, and to strengthen nuclear research and education capabilities at U.S. universities and colleges.

Through its Nuclear Energy University Program (NEUP), the Department is providing $5 million in scholarships and fellowships to 117 U.S. nuclear science and engineering students, and nearly $13.2 million to 39 U.S. universities and colleges to purchase new equipment or to upgrade their research reactors.

“Restarting the U.S. nuclear industry is a critical part of our efforts to build a clean energy economy and create new clean energy jobs,” said U.S. Secretary of Energy Steven Chu. (right)

Steven Chu“To ensure American leadership in the global nuclear energy industry, we need a skilled workforce for years to come. This investment will give our students the support and resources they need to advance nuclear energy and keep America at the forefront of the nuclear industry.”

The Department is awarding 85 scholarships to undergraduate students and 32 fellowships to graduate students in engineering and science programs related to nuclear energy. Each scholarship student will receive $5,000 to help cover the cost of his or her education for the next year. Fellowship winners will receive $50,000 a year over the next three years to help pay for their graduate studies and research.

In addition, 39 universities and colleges in 27 states will receive approximately $13.2 million in grants to upgrade their research reactors and also purchase new equipment, such as instrumentation or new computers, which will bolster their ability to conduct cutting-edge nuclear energy research.

Since 2008, the Department has provided more than $80 million in funding to U.S. universities and students through NEUP.

DOE released a list of awardees and additional information on the Nuclear Energy University Program is available.

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Canada’s rocky road with nuclear energy

The path to commercial success is full of potholes

In_the_ditchIn the past year the Canadian nuclear industry has taken a couple of hits on the chin. These events raise the question of whether AECL is in the ditch or can a government tow truck get it back on the road? The commercial path forward is like an ice-covered road in a Canadian winter and there are plenty of back seat drivers. Here’s why.

First, the Chalk River nuclear reactor, a supplier of medical nuclear isotopes for most of North America, shut down for extensive repairs. The unplanned outage created an international uproar. Second, the AECL led refurbishment of the Point Lepreau had extensive schedule delays and went way over budget. The delays ended plans for a merchant led construction of two new reactors. Third, the Canadian government led by Prime Minister Stephen Harper, said last year it would put AECL on the auction block offering nation’s CANDU reactor vendor for cash on the barrelhead. It didn’t help matters that Ontario provincial leaders cancelled a $20 billion contract for new reactors spiking the potential for thousands of jobs for AECL.

Chalk River to load fuel

cnsc Is there any light at the end of the tunnel? Actually, there is some progress. This week the Canadian Nuclear Safety Commission authorized the restart of the reactor which had been shut down since May 2009. It reportedly cost just under $100 million to make the repairs.

“Following a public hearing held on July 5, 2010, in Ottawa, Ontario, the Canadian Nuclear Safety Commission (CNSC) announced its decision to authorize AECL to reload fuel in the NRU reactor and to the restart the reactor at Chalk River, Ontario.”

AECL officials told the Canadian news media the reactor will be producing medical isotopes by the end of the month. The shutdown had generated a crisis across Canada and the U.S. curtailing the supply of medical isotopes used for diagnostic and treatment procedures.

Dr. Christopher O’Brien, president of the Ontario Association of Nuclear Medicine, told CBC News July 7 he regards the reactor as an “albatross",” but that he’s grateful it is back in operation.

AECL still on the auction block

For more than a year Canadian government officials have been trying to find a buyer for Atomic Energy Canada Ltd (AECL). Every few months the current Natural Resources Minister rolls out a statement to the news media that the government is in negotiations with interested buyers. Apparently, whatever terms and conditions the government has been offering hasn’t work as no deals were booked by buyers. Now the Canadian parliament is reportedly considering a measure to loosen the requirements for a sale.

Some critics are calling it a “fire sale,” and say the government is planning a “give away” to foreign powers of the CANDU technology. Bear in mind AECL hasn’t sold a new reactor to anyone, even its own provincial government, in the past 10 years.

Minister of PWGSC - Christian ParadisThose criticisms haven’t stopped Natural Resources Minister Christian Paradis (right) from tell a Senate finance committee he needs flexibility to negotiate with several interested parties.

The Organization of CANDU Industries, which claims to represent 164 businesses and their 30,000 employees is opposed to the legislation and the sale. Neil Alexander, the organization's President, told the Toronto Sun July 7 the legislation would give the government “free reign” to do whatever it wants with the crown corporation. He also said the he’s ok with the government seeking new investors in AECL as long as the firm remains intact and in operation in Canada.

Can AECL compete sold or not?

Natural Resources minister Paradis has other ideas. He told the Senate that AECL is “too small to compete” in the global nuclear reactor market. He called for investors to pump it up so it can go head-to-head with global giants like Toshiba and Areva.

This rationale was hooted down by critics who said it was unrealistic. John Cadham, a nuclear energy expert at Carleton University, told the Toronto Sun July 7 that “privatization is a code word.”

foggiest ideaHe said the real meaning is the Harper government, after two years of flogging AECL to potential buyers, “still hasn’t the foggiest idea” what to do with the company.

He added that, de facto, selling AECL puts a major piece of Canadian energy policy in the hands of a foreign government. He noted that only state-owned firms like French nuclear giant Areva or Russia’s Rosatom have the financial ability to buy the company.

Why buy AECL?

As a practical matter Areva is an less likely suitor for AECL given that the firm has a full plate with construction of two reactors in Europe, two more in China, and a pressing need for new capital that has the government offering 15% of the state-owned firm to outside investors. AECL, with its one-of-a-kind CANDU technology, isn’t likely to be a first choice for an acquisition by Areva which has its own 1,650 MW reactor to market to customers.

The Russians have shown interest in the past with AECL, but have had success marketing their own 1,000 MW reactors to India, Vietnam. China, and countries in eastern Europe which used to be behind the Cold War’s ‘iron curtain.’

The pony in the purchase of CANDU could be in the after market of servicing the needs of the 20 or so reactors in Canada and about another dozen worldwide. The actual number of active reactors depends on how you count them relative to producing power, under refurbishment, or slated for decommissioning. Future market share would depend on whether the new ACR1000, still in design review at the Canadian Nuclear Safety Commission, could compete in world markets.

AECL may be in much the same position as former Canadian car maker Studebaker was in after the company closed its last plant in 1965. With a small installed base of vehicles, some dating back to the post WWII era, parts and service offered by third parties insured the car lived on long after the last unit rolled off the assembly line.

Point Lepreau work delayed

Just as energy officials in New Brunswick thought they were out of the woods with the refurbishment of the CANDU reactor at Point Lepreau, a new, two-month setback resulted in a new round of delays. The trouble this time with the $1.4 billion project is that tubes that hold nuclear fuel aren’t meeting specifications once they are installed in the reactor. Getting all the tubes in airtight condition will take another two months.

schedule time is moneyAccording to a May 26 report by CBC News, the project is now 17 months behind schedule and has cost the utility that owns the 635 MW reactor millions in purchased power to replace its capacity while it has been down for more than two years. The reactor project has been plagued by high profile incidents like dropping two multi-million turbines into the brackish waters of St. John’s Harbor a year ago this month.

New Brunswick Power President Gaeten Thomas has been reduced to jaw boning AECL to speed things up. His utility and provincial government officials have petitioned the Federal government in Ottawa to reimburse them for excessive costs include buying replacement power. Plans for a new reactor fell through in part because of disillusionment with the progress of the current project.

That may change in the future because of demand for electricity from New England states to the South. News reports from New Brunswick indicate Areva may be interested in building a new reactor there based on the merchant model. Success would depend on construction of new transmission lines through the province, into Maine, and then connecting south to power hungry cities in Massachusetts and other New England states.

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Wednesday, July 7, 2010

Free webcast – Is there hope for solar?

Examining the prospects for scaling up solar energy

solar-energy

Live Webcast July 14 ~1 PM Eastern, 10 AM Pacific

Click here for Free Registration

The sun is the primary source of energy in our solar system, yet most of the power running through our electric grid here on earth does not come from solar energy. It comes from a multitude of other, often environmentally harmful sources.

Solar power currently generates less than 1% of the electricity used in the United States. Will solar provide a greater share of our energy in the future? Should it? If so, how will we reach that point?

energycollective_logo The Energy Collective presents this webcasts to explore the prospects for solar, discuss which forms of solar power have the most potential, and compare the costs and benefits of solar to other forms of energy.
In addition to any questions you may ask our panelists live during the webinar, we'll ask:

  • What, if anything, should be done to drive up solar's share of our energy burden?
  • Which form of solar power has the most potential? Rooftop panels? Photovoltaic arrays? Concentrated solar thermal power?
  • Solar energy is more to costly to produce than many other forms of energy. What's the best hope of bringing those costs down?

Featuring:

Marc Gunther, a writer, speaker and consultant, who focuses on business and the environment. He worked for 12 years as a senior writer at FORTUNE magazine, where he is now a contributing editor. His most recent book, “Faith and Fortune: How Compassionate Capitalism is Transforming American Business,” was published by Crown in 2004. A graduate of Yale, he lives in Bethesda, MD.




Osha Gray Davidson, an investigative reporter who has been covering environmental issues for twenty-five years, with work appearing in Grist, The New York Times, Mother Jones, Rolling Stone, Popular Science and others. Davidson is currently the energy correspondent for OnEarth magazine and edits the blog he founded, The Phoenix Sun, which focuses on solar power and renewable energy.



Michael Jungreis, Business Development Manager for Siemens Concentrated Solar Power Ltd. Michael's responsibilities include business development of the utility scale solar thermal markets in the US, India and Australia. Michael comes to Siemens from the Israeli solar-power company, Solel Solar Systems, which was acquired by Siemens in 2009. Michael also served as Executive Director of the Israel Jordan Chamber of Commerce from 1999-2002 and as head of the Middle Eastern desk at the Israeli Ministry of Finance from 1997-1999.



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Is Asia rising to dominate the global nuclear industry?

A series of headlines reveals strong competition between Japan and South Korea for market share

naoto-kanThe Wall Street Journal reports July 6 that Japan is aligning its nuclear industry to support exports of nuclear reactors and to respond to the competitive threat from South Korea. Six companies are working under the umbrella of a government backed effort through the Ministry of Economy, Trade and Industry.

The Wall Street Journal reports June 29 that the first evidence of government support appeared when Japan and India began negotiations to ink a civilian nuclear energy pact. The talks reportedly kicked off between Indian Prime Minister Manmohan Singh and Japanese Prime Minister Naoto Kan (right) during the G 20 meeting held in Toronto in June.

India plans to add 20 GWe of nuclear generating capacity over the next two decades. So far Japan hasn’t had any of the early action with India. Four new reactors to be built by the Russians and two more by Areva. Neither Westinghouse nor GE Hitachi have signed deals to build new reactors for India. However, GE Hitachi has signed a deal with Indian heavy manufacturing firms to develop a factory to build reactor components for domestic use and export.

The WSJ reports that Japan’s Kan has an economic growth strategy that relies on more exports of heavy industry projects. Japan is feeling the heat of competition from South Korea which inked a $20 billion contract last December to build four reactors in the United Arab Emirates (UAE).

The firms involved in the Japanese initiative include three nuclear energy utilities with deep operation experience and three firms that manufacture reactors components and build power plants. They are Tokyo Electric Power, Chubu Electric Power, Kansai Electric Power, Toshiba, Hitachi, and Mitsubishi Heavy Industries.

There is stiff competition for Japan’s export drive from South Korea. Bloomberg wire service reported June 30 that Doosan Heavy Industries won a $3.9 billion order to supply nuclear reactors, turbines, and related components to Korea Electric Power, which won the UAE contract.

vietnam-map Japan is focusing its nuclear energy marketing efforts on Vietnam which recently announced plans to build 13 new reactors by 2030 and inked a deal with Russia for the first two units.

Japan has been training nuclear engineers from Vietnam to help that country with its energy strategy. World Nuclear News reported July 6 that Japan is providing technical assistance to Vietnam’s Agency for Radiation and Nuclear Safety.

Small reactors in the mix

According to a May 4 report in the Straits Times, Malaysia is looking into acquiring small reactors to meet its energy needs. Its short list of sources leads with South Korea.

Seoul's Ministry of Education, Science and Technology said June 14 that a consortium led by Korea Electric Power Corp. will inject $82 million into a project to complete design work and technical verification of the system integrated modular advanced reactors ( SMARTs).

The project is organized by the state-run Korea Atomic Energy Research Institute. SMART is a pressurized water reactor, designed to generate up to 100 MWe for thermal applications such as seawater desalination.

China to shift builds to local sources

China is planning to increase its nuclear energy generating capacity from the current level of 9 GWe to 70 GWe by 2020. This investment in energy infrastructure will boost nuclear energy as a carbon emission free source of electricity from 1% of the nation’s power to 5% of its energy supply.

Map of China’s civilian nuclear projects

(Image via World Nuclear News)

China is building four new reactors with technology from Toshiba’s Westinghouse. The WSJ reports that new deals are being negotiated to build six more reactors. UPI reports July 6 that the plants will be located in Hunan, Hubei, and Jiangxi inland provinces.

However, the WSJ reports June 28 that China’s extraordinary drive to build new reactors is being hampered by a lack of trained nuclear engineers. The newspaper said projects could falter as managers learn to deal with the complexities of building reactors and there is a risk of accidents during construction.

Despite these challenges, the WSJ reported that banker Credit Suisse projects that the Chinese nuclear market will increasingly be driven by national companies building new reactors using Westinghouse AP1000 technology.

Areva in talks for new reactors in China

Anne LauvergeonDow Jones wire service reports July 6 that French state-owned nuclear giant Areva, which is already building two new nuclear reactors in China, is reportedly negotiating new deals for more reactors. The wire service cited a statement by CEO Anne Lauvergeon right), who made a presentation about the future of the company at an energy conference in France. Areva, like Japan, is struggling to increase its global market share of the nuclear energy business.

Areva and Lauvergeon have been under fire by the government of French President Nicolas Sarkozy over the loss of the UAE contract to South Korea. An energy policy paper, which includes an assessment of the future of the company, is reportedly under wraps, but may be released in the next few weeks according to a July 6 report by the AFP wire service.

The French government is planning to offer a 15% stake in Areva to investors. Mitsubishi and the sovereign wealth fund of Qatar are said to be high on the list of potential buyers. The sale of the shares will raise capital to support Areva’s expansion in global nuclear markets.

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Tuesday, July 6, 2010

German’s nuclear tax a work in progress

After deciding two years ago this month to keep the nation’s 17 nuclear reactors, the government now sees them as cash cows for the treasury.

Cashcow cartoonIn July 2008 German Chancellor Angela Merkel returned from the G8 summit held in Tokyo with a commitment to keep the nation’s 17 reactors in operation rather than shutting them down.

At the time, Merkel said the rationale was using the carbon emission free source of electricity generation to slow the grow of greenhouse gases.

In doing so Merkel challenged the policy of a predecessor government and her coalition with Greens and Social Democrats. It was a risk that paid off because she won re-election in September 2009 in a close vote with future of nuclear energy being one of the key issues.

Two years later her government is using that policy change as a crucial fulcrum for leverage with the nation’s four nuclear utilities telling them unless they accept a tax as a price for keeping the plants open.

The taxes are substantial. The Financial Times reported June 24, the revenue measure could raise as much as euro 2.3 billion a year. RWE and E.on, the two major nuclear utilities, are "furious" with Merkel over the tax proposal. The newspaper said the utilities "feel like sitting ducks."

Dow Jones News Wires reported July 1 German Economics Minister Rainer Bruederle said the government supports nuclear reactor life extension. He added that the planned tax on fuel rods will be a trade-off to the utilities in return for permission to run the reactors past 2020.

There are several plausible reasons for Merkel’s quest to tax the reactors.

  • Nuclear power plants are easy to tax. You can’t move them around like cars and hide them from the tax collector. Nuclear fuel has built in accountability which reduces the administrative burden to mere bean counting.
  • The reactors are paid for so they are cash cows for the utilities. The issue of the tax is not if but how much? Politically, the tax, which might not be allowed to be passed on to ratepayers, will be presented as a "windfalls profits" tax.
  • The tax revenue is needed because Germany is offering voters an austerity budget. Any new source of revenue will reduce the kinds of political tensions that erupted in Westphalia in May when voters rejected Merkel’s slate of candidates over austerity measures coupled with financial support for bailing out Greece.
  • The tax revenues will bolster her position relative to the Greens and Social Democrats who still press to get rid of the reactors. Merkel can now challenge them to come up with plans to raise other new taxes to replace the revenue that would otherwise come from the nukes. Merkel can paint her opponents into a political corner over reactors as a tax and revenue issue.

German energy policy statement due in September

Reuters reported June 30 that German Energy Group BDEW is pushing back on the tax proposal saying it will cut into investment in new energy generation projects including wind energy along the country’s North Sea coast. The German government is expected to formally roll out its proposed tax policy in two months in an energy policy statement.

BDEW President Rolf Martin Schmitz (right) told Reuters Germany needs (euro)40 billion in new energy generation capacity as well as transmission grids by 2020. He said the nation is running behind on new transmission lines with only 90 km of a planned 850 km built since 2005.

His clear message is that the tax will further retard investment in needed energy infrastructure that is already running way behind schedule. Taxes will cut into cash flow, and with it, new energy investments.

Schmitz said the reactors are needed to meet baseload demand because wind is too variable providing less than half their rated capacity. He said the reactors have a crucial role in reducing CO2 emissions and that Germany will fall short of meeting its goals if the reactors are shut down.

Schmitz serves on the board of directors of RWE, which is one of the four utilities that will see its reactor revenues taxed under the new policy. It’s reasonable to assume that his protests about the taxes on behalf of BDEW’s 1,800 member firms also represents the views of RWE.

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Monday, July 5, 2010

Are investors wary of new nuclear builds?

Bank report says prospects are going south, but consultant says the real name of the game is managing risk

confusedA new report by Citigroup on the prospects for equity investors in the nuclear energy industry casts doubt on prospects for profits.  While the report is focused on Europe, its authors claim their findings have equal weight in the U.S. 

Cited in the July 2010 issue of the EEnergy Informer, published by Fereidoon P. Sioshansi, Ph.D., a utility consultant, he writes Citigroup's report "New Nuclear – the Economics and Politics" says that for every step forward there is another that takes a step back.

Separately, a group of analysts at consulting firm Arthur D. Little say the financing isn't so much the problem as managing the risk with the key emphasis on "management." In a June 2010 report titled "Nuclear New Build Unveiled," the firm reports realistic schedules, and managers who understand the complexities of building new nuclear reactors, are the essential elements of managing risk. The report's authors say that failure mode will follow not paying attention to these issues.

coolhandnukeRead all about it exclusively at CoolHandNuke, a nuclear energy jobs portal and a whole lot more. 

 

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