Wednesday, March 21, 2012

Updates on international nuclear energy programs

Setback on financing at Temelin in Czech Republic

A report by an influential banking advisory firm has set back plans to build two new nuclear reactors at an estimated cost of $10 billion. The Prague-based firm of Candole Partners wrote in January the project, originally scoped to include five new reactors, isn't financially feasible due to low demand for electricity.

Czech state-owned utility CEZ has disputed the analysis saying it has a short-term perspective and that demand for base-load power will increase especially as Germany phases out its remaining nine reactors by 2022. That's about the time the new reactors at Temelin would come online.

Candole said its analysis is based on the $7 billion CEZ would have to raise to pay for the two new units which would raise its debt ratio higher than other European electric utilities. It turns out the Candole report exposed a rift in the thinking of CEZ's executives. CEZ CFO Martin Novak reportedly wants to bring in new investors to share the risk and lower the debt, but CEZ CEO Daniel Benes is on record as being opposed to bringing in new investors.

In the meantime, CEZ is moving ahead with the bid process for the two new reactors with responses due from vendors by July. The short-listed bidders are Areva, Rosatom, and Westinghouse. A key success factor for the winner will be to be able to convince CEZ it can deliver the twin units on time and within schedule. So far, in that regard, Westinghouse's experience in China with four new AP1000s puts it ahead of Areva which has significant schedule delays and cost over runs at a plant under construction in Finland.

China restart may soon be underway

Areva EPR under construction in China
When the Fukushima crisis occurred in March 2011, the Chinese government suspended approvals of new reactor projects with a special emphasis on its domestic and so-called "generation II" reactor technology.

The government continued work on four Westinghouse AP1000 and two Areva EPR Gen III+ reactors. Both designs include enhanced safety features for dealing with loss of offsite power and the need for cooling water in an emergency.

One of China's most significant challenges isn't in the reactor technology it uses, but in the development of a strong nuclear safety regulatory function. The government reportedly has a new set of regulations that strengthen the safety oversight role, but it is unclear whether it will have the power to stand up to the ministry which oversees reactor development. The new regulations are expected to be published this month.

China completed its assessment of its 10 GWe of operational reactors last Augusts amid speculation that would be the milestone that would allow new reactor projects to get going. However, the new regulatory framework took more time, and may have experienced political delays. In any case, most observers believe the regulations were done by December 2011 and that China was then moving ahead to reorder its new starts related to the new safety regime.

Nuclear industry analysts expect that China has used the time since April 2011 to review its portfolio of planned new nuclear projects. Two trends emerge from their reports. The first is it is likely China will not construct its previously announced target of 80 GWe of new reactor generating power in the next two decades. A build of 50-60 GW seems more likely according to Steve Kidd from the World Nuclear Association. Second, China will use its technology transfer agreement with Westinghouse to develop domestic versions of the Gen III+ reactor at the 1,100 MW and 1,400 MW power ratings.

There is also a question of whether China will be able to continue to self-finance its new nuclear build. Even at internal prices of $2,000/Kw, an 1,100 MW plant comes in at $2 billion. A new build of 60 Gwe requires $120 billion.

The New York Times reported March 21 that the Chinese government is making is easier for foreign investors to put money into China’s stock market. This move may be a signal that the era of 100% self-financing large capital infrastructure is coming to an end.

According to the newspaper, the move is in response to a rising flight of capital from the country, a deepening slump in real estate prices, a weak stock market and at least a temporary trade deficit caused by a steep bill for oil imports.

The newspaper said these issues are offsetting fears of the potentially inflationary effects of big inflows of foreign cash.

If China needs cash from outside investors to bolster its growth, will it also need equity investments in its ambitious new nuclear building program? Will this need for cash speed up efforts by China to obtain export earnings for sales of its domestic version of Gen III+ technology? For instance, China is reported to be considering entering a bid for South Africa's new build.

China has also been building up the capabilities of its nuclear components supply chain. The one year delay in start of new projects has also given China some breathing room to address quality assurance issues for both components and systems. John Ritch, head of the World Nuclear Association, told the DowJones News Wires March 8 he believes China will eventually emerge as a world class supplier of nuclear reactor components.

South Africa to ask for bids on 9.6 GWe

In its latest effort to build new nuclear reactors, South Africa said March 8 it plans an ambitious program to build the equivalent of six Areva 1,600 MW EPR light water reactors. It expects to release bid documents in the next few months.

One possible scenario for financing is that the winning bidder will own and operate the plants for the first 15 years of their operational lives. In return the government would guarantee a profitable rate of return through Eskom, its state owned electric utility. After 15 years, the reactors, with proven track records, would be sold to investors for the remainder of their 60 years of operation.

South Africa cancelled a similar bid process in 2008 due to the lack of financing for its ambitious plans. Eskom was broke because the government refused to allow it to increase electricity rates to pay for future capital improvements. In turn, the nation's heavy industry suffered from brownouts leading to a significant dip in GNP.

Likely bidders include Westinghouse, Areva, Atomstroyexport, Korea Electric Power, and China Guangdong Nuclear Power Group. Ditebogo Kgomo, the government's point man on the nuclear tender, told Reuters he wants the bid documents out the door by the end of 2012. The first units could be generating power by 2022 or earlier.

Vietnam continues ambitious efforts

The New York Times reported March 3 that Vietnam now plans to build ten new nuclear reactors by 2030, two more than previously announced by the government. A major challenge for the country, which wants reliable electric power to attract manufacturing plants, is to staff up to build and operate them and to have an effective safety oversight function.

Russia has been selected to build Vietnam's first two nuclear plants. Japan is reported to have won the contract to build the next two, and South Korea is said to be pursuing the contract for the third two-reactor power station. Financing is being provided in the form of loans and export credits from Russia, Japan, and South Korea.

Vietnam is already home to high tech manufacturing having opened a $1 billion computer chip manufacturing center for Intel. The government wants to exploit bauxite deposits in the central highlands using electricity from new reactors to smelt aluminum and produce finished goods.

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Momchil said...

I'm not sure how "influential" this banking advisory firm. They made similar report against the new NPP in Bulgaria. I think they are lobbing against nuclear in this part of Europe.

SteveK9 said...

Note that the Areva EPRs being built in China are also on-time and on-budget. This seems to have more to do with China than the reactor design.