Tuesday, November 15, 2011

EDF seeks to be French and not French at the same time

The state-owned nuclear power generating company seeks a more flexible identity

Henri Proglio, EDF CEO
In a series of penetrating news reports, the Financial Times (London) has cast some light on the future of Electricite de France (EDF), the french firm that runs that nation's 58 nuclear reactors. EDF is also pursuing a global strategy with plans for six new power stations in the U.K.  Challenges facing the firm fall in the unpredictable realms of politics.

In response, EDF wants to partner with other reactor vendors besides Areva in hopes of establish a new global commercial footprint not subject to the whims of voters and politicians on the domestic side of the ledger.

According to the FT articles, EDF CEO Herni Proglio is "rattled" by the prospects of an election victory next spring by Socialist candidate Francois Hollande who wants to cut France's reliance on nuclear energy. Currently, France gets 75% of its electricity from nuclear reactors.

Francois Holland
Mr. Hollande, in speeches to his socialist political supporters, has called for cutting reliance on nuclear reactors by 50%.  According to polls, Hollande has "unprecedented centerist support" among voters which is why Proglio is worried and taking action.

The problem for EDF is that it makes two-thirds of its profits from running France's nuclear reactors.  Raising new capital for future expansion to replace aging power stations is being tossed into uncertain realms by the prospects of a socialist win.  Also, the new EPR at Flamanville is running behind schedule by at least a year and has gone over budget.  It doesn't help EDF's case if the flagship project is in a tailspin.

Proglio's two-pronged pursuit of profits

So EDF is going at the problem on two fronts. First, he is telling French rate payers that turning off the nation's nuclear reactors will result in substantial increases in the cost of keeping the lights on.   He told the FT a 50% cut in nukes would result in a {e}60 billion increase in energy costs and result in massive job losses as businesses swap payrolls for electricity bills.

Second, EDF is looking overseas for work that would keep its operations profitable if the worst comes to pass at home.  To do this Proglio is unbuckling the joined at the hip relationship his firm has had with Areva.  He told the FT Nov 14 he is repositioning the company to be less French and more global in its partnerships. Unfortunately for EDF, this is not going to be a case of scooping up low hanging fruit.

He says EDF is no longer just selling power plants. Instead, EDF is in the business of building power stations and operating them regardless of the brand on the reactor.

"We need international industrial partnerships that fit with the future of nuclear, and not just a French proposal."

To achieve this vision EDF is now talking about partnerships with Rosatom or Chinese state owned enterprises to help them export indigenous designs to other countries.  He says this paradigm could extend to "any reactor in any country in any part of the world."

New CEO yes, happy to see you, no

This can't be good news for Areva which suffered through a tough relationship between EDF and its former CEO Anne Lauvergeon. Now, with Proglio's new global visions, Areva may feel the relationship will have new tests of the ability of the two firms to do business.

A key battle ground for market share is the U.K. where EDF has six sites each of which could support one or more Areva 1,650 MW EPRs. If EDF starts working with other reactor vendors, that massive new build, and the jobs and income that come with it, could be in jeopardy.

A strategy for Areva would be to convince EDF to invest in the completion of the design of a smaller 1,100 MW design reactor.  Areva has been working on one for a while in a joint venture with Mitsubishi, and pitched it to the electric utility in New Brunswick, Canada.  So far no customer has shown interest in ordering one.  Perhaps EDF would see value in referencing such as design for smaller markets like Jordan. 

Not the only player on the field

EDF's new global vision will also be tested by competition from other vendors.   Rosatom, the Russian state-owned nuclear reactor consortium, told the FT Nov 14 it plans to double its size and global market share.

Sergei Kirienko, who heads Rosatom, told the newspaper pitiful cries about the collapse of the nuclear industry since Fukushima are patent nonsense.

"We've doubled our order book," he said despite the loss of the partnership with Siemens.

The firm has orders for reactors from Turkey, China, Vietnam and is an aggressively pursuing two new reactors at CEZ's Temelin site in the Czech republic.

And there is always gas

Back in France some analysts think EDF may be over reacting to the Socialists' political rhetoric and that once in office they will recognize the reality of energy supply in France.

EDF isn't so sure. To hedge its bets the firm is making new investments in liquified natural gas supplies which will be needed to supply baseload power to keep the grid up for all those wind towers and solar panels.

The story about France and nuclear energy used to be "no coal, no oil, no  gas, no choice," which is why as a matter of state policy, EDF is still more a state-owned enterprise than an investor focused corporation.  If CEO Proglio really wants to go global, he may have to seek privatization as the next step for EDF.

That plan won't go down so well with the Socialists, but then maybe the new regime will turn out to be pragmatists.  Even so it appears EDF isn't taking any chances.

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Kit P said...

Since EDF has ordered new steam generators, it does not look like it will need very many new reactors for 20-40 years. While 1600+ MWe load following reactors fit nicely into EDF's grid, there is a whole list of places that a smaller reactor will do just just fine along with some gas turbines.

Anonymous said...

From Dave Walters . . .

"EDF has a huge conundrum on it's hands. To replace the reactors that were being built in the 1970s and which went on line in the 1980s, most have hit or will hit the 40 year mark shortly. Over the next 20 years, France, as a nation, has to make a decision NOW, not in the future. It has to replace these reactors, 50 of them, or do something else, which naturally means gas and some expensive form of unreliable like Germany has been doing."

"It's clear prices on the EPR are not coming down, or not enough, anyway, unlike what most expect from other reactor models. So in this case, it's EDF that should begin to look for alternative reactor designs. Dan notes that they are looking around so as not to be wedded to Areva. This is a *good thing* and I'm glad they are doing this. But there is more..."

"The bigger problem, as i see it, has nothing to do with this. It's all about the inability of EDF and the large number of pro-nuclear people in France to make the case to continue it's nuclear energy base. There seems to be nothing outside of defensive formulations about nuclear. They need to go on the *offensive* and "tout" nuclear and even suggest it's expansion, to get rid of the remaining fossil fuel. France needs to lead and EDF is not leading."

I see the a "acceptance" by the French gov't and perhaps a majority of people in France for "less nuclear" and "more renewables" as a political defeat for humanity's future. How did this happen? How did, even before Fukushima, nuclear's image sink enough to allow the truly crazy French anti-nuclear community to dominate the discussion. I say crazy because the main French nuclear group, not Greenpeace but an affiliated organization, "France Without Nuclear" has proposed the 100% substitution of France's nuclear regime with natural gas...as a "bridge technology".