By Nancy E. Roth, Managing Editor, Fuel Cycle Week
“Not a whole army” but a small panel of experts “respected by all sides” that could offer an intimate, balanced, “serious conversation” on the future of nuclear development: This was what the Senate Committee on Energy and Natural Resources sought for its March 18 hearing on nuclear energy development, a committee staff member told FCW.
Thus Marvin Fertel, president and CEO of the Nuclear Energy Institute, found himself seated at a table before the Senate committee with Dr. Thomas Cochran, senior scientist in the nuclear program of the Natural Resources Defense Council. Nuclear Regulatory Commission Chairman Dale Klein had just stepped down, having testified on the commission’s ability to oversee a new generation of nuclear build in the U.S.
But after each panel member delivered his opening statement, what was intended to be a reasoned discussion quickly broke down, culminating in face-to-face combat between Cochran and ranking Republican Lisa Murkowski of Alaska, who is rapidly emerging as one of the Senate committee’s fiercest advocates for nuclear.
Rational Discussion Derailed
Cochran was trying to make the reasonable point that NRDC’s favored approach to cutting carbon emissions, which is to establish a carbon cap and trade program, would be helpful to the nuclear industry. Fertel acknowledged as much later in the hearing.
But the key difference between them was their contrasting view on the use of government loan guarantees in support of nuclear. Fertel thought loan guarantees were “good public policy because they allow for a more efficient deployment of clean technologies.” He also said they helped address a “structural problem” in funding new plants, stemming from the mismatch of large upfront capital requirements and the relatively small private-sector utilities in the U.S.
Cochran, however, espoused the view that the government should not extend loan guarantees for nuclear plant construction except for “lead units of new nuclear plant designs not previously deployed” in the U.S. He insisted that utilities operating in regulated states did not require loan guarantees because they could obtain regulators’ permission to raise rates in order to finance plants. Moreover, loan guarantees to “underwrite the U.S. market penetration of additional designs already deployed or under construction in foreign markets would only further distort the energy marketplace and undermine the goal of design standardization,” he said.
He also insisted that the federal government should not legalize commercial spent-fuel reprocessing due to its costs, and urged it instead to develop an alternative geological repository for spent fuel.
Any of these points could have been fairly debated. But midway through the discussion Cochran undermined his own arguments by displaying a fundamental misunderstanding of the Department of Energy loan guarantee program, as well as how the global nuclear energy market works. In so doing he ultimately derailed the hearing.
Wonk-Speak Gives Way to Wild Talk
Sen. Murkowski first asked Fertel about how much in loan guarantees was needed to support an industry restart. The NEI official told her that the number of applications for the first DOE loan guarantees indicated a total of about $93 billion. Murkowski then turned to Cochran and asked whether he thought the U.S. could achieve the Obama administration’s “aggressive” goal of slashing carbon emissions 83% by 2050 without expanding nuclear energy.
Cochran responded that the U.S. already had 104 reactors, and that those were “here to stay.”
“If we just stay at our 104, can we get there from here?” Murkowski asked.
Cochran began a longwinded answer that appeared to evade the question, to the senator’s visible annoyance. In part he said, “The highest priority is to get federal legislation to implement a meaningful cap and trade program on carbon. And we should solve the climate issue by dealing with [carbon as a] pollutant. Not by going out and subsidizing your favorite technology.”
Her frustration plainly mounting, Murkowski cut him off by repeating the question. “Can we achieve the level of reduction goals we are setting out, without nuclear?”
“NRDC thinks we can,” allowed Cochran, as he began another long explanation. “Our concern is that providing these unlimited loan guarantees to the nuclear energy industry will ultimately reduce the efforts to deploy technologies that can provide carbon offsets more cheaply and more quickly.”
Growing testier as the senator continued to prod him for a more direct answer, the NRDC representative then excoriated as “a bad business model” the new reactor UniStar has proposed to build at Constellation Energy’s Calvert Cliffs plant in Lusby, Maryland. This, he claimed, was “ultimately a proposal by the French government…to build a French plant, an EPR, which is built by AREVA and owned by the French government.”
“I’m not sure where you’re going with this,” said Murkowski icily, adding that her time was up.
Cochran literally began shouting. “You’ve got to go to your constituents…and say we want to tax homeowners, families, so that we can provide insurance to the French government, so that through Electricité de France they can enter the American market and sell electricity below cost, so that consumers in Washington ,D.C., and Baltimore don’t have to [be energy efficient] and they can make a profit by selling nuclear energy below cost.”
So shockingly wide of the mark were the content and tone of the outburst that the discussion never really recovered. Even the newly elected Mark Udall (D-Colo.), a champion of renewable energy generation, was amused, offering to yield his questioning time to Murkowski to continue the “informative and entertaining interchange.”
Fertel assured the senators that their constituents “are not paying any money for the loan guarantees that we get. We’re paying the government money for the loan guarantees that we get, and then we’re producing cheap electricity with it.” He added that Cochran’s “attack on the French” was out of line, as AREVA was building facilities in the U.S. that were creating American jobs, including union jobs for the plant builders in Maryland. “It’s a global market,” he said, “but the building is here and the electricity is here.”
Out of $111 billion in the loan guarantee program nuclear could only claim $20.5 billion, he pointed out, and wondered if NRDC would also want to remove the other $90 billion allocated for renewables and other technologies. “We don’t,” Fertel said.
Energy Committee Warns Gov’t About Yucca-Related Liabilities
By Nancy E. Roth, Managing Editor, Fuel Cycle Week
Last week the committee also released a letter responding to a Feb. 19 request from the Senate Committee on the Budget for its “views and estimates” on the administration’s budget “blueprint” provisions. For the most part the Energy committee responded positively. “We generally share the President’s broad goals,” the letter said, adding, “We hope to report a comprehensive energy bill to the Senate in the next few weeks.”
The committee liked the blueprint’s proposal to allocate $26.3 billion to the Department of Energy in FY 2010, effectively doubling investment in basic sciences, loan guarantees for innovative energy technologies and carbon capture and storage, plus upgrading the transmission grid.
But it had a less positive response on the proposal to halt further work at Yucca Mountain, which, it pointed out, ended a quarter century of work and offered no alternative disposal plan for spent fuel from commercial and naval nuclear facilities, and legacy defense high-level waste.
DOE had been contractually obligated to take title to commercial spent fuel by Jan. 31, 1998, and courts had already found the department to be “in partial breach of those contracts” for having failed to meet the contractual deadline. Utilities have won several hundred million dollars in damages, the committee said.
“The Committee on the Budget should be aware that the government could be held liable for much larger sums, including the repayment of over $16 billion in fees collected from the utilities and nearly $14 billion in interest,” the committee added, “if the courts find the government to have totally breached the contracts… .”
The Senate Committee on Energy and Natural Resources' hearing on nuclear energy development is available for viewing online here.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Georgia Power chalked up a victory last week as Georgia's Public Service Commission approved a Construction Work In Progress (CWIP) that would allow the utility to pass the costs of new generation on to consumers before any electricity is actually produced. Pending approval from the governor, the company plans to charge ratepayers $6.4 billion starting in 2011 to build two new 1,100 MW AP1000 reactors at the Vogtle plant near Augusta. The units are slated to begin operation in 2016 and 2017.
The merits of CWIP have been a contentious topic in Georgia, though a great deal of the debate has less to do with financing and accounting than it does head butting between pro- and anti- nuclear factions. Some consumers are dismayed at the prospect of paying higher energy bills for electricity they are not yet receiving, but Georgia Power says the CWIP will actually reduce costs in the long run by eliminating $300 million in additional financing costs. Consumer advocates and anti-nuclear forces are concerned that passing costs to customers as the reactors are built will reduce incentives to keep the project to schedule and budget, especially given the differing cost estimates for the Vogtle expansion. Georgia Power gives a figure of $6.4 billion, but some analysts say $8.8 billion is a more realistic price tag. Still, Georgia Power's campaign has been very strong, and we expect the governor to sign the bill.
America's nuclear renaissance has ignited just in time for the economy to lurch into recession. Credit and investment is harder to come by, which makes the high up-front costs of new nuclear generation an even greater challenge. Along with loan guarantees from the Federal government (which at current allotment can only provide for a few among the army of prospective new build projects), CWIP is likely to become a more standardized method for financing nuclear projects.
In Missouri, AmerenUE is pushing hard for a reversal of the state's 1976 ban on CWIP as it seeks funding for the planned second reactor at its Callaway station near Fulton. The bill was approved by the states' House Committee on Utilities and moved on for consideration by the full House. Further south, Representative Scott Marin introduced a bill to the Oklahoma House of Representatives that would allow CWIP with the intention of attracting nuclear companies to the state. On March 24, the House's Energy and Utility Regulation Committee passed the measure 17-4.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Despite growing support for the pro-uranium mining Liberal National Party in the lead up to Queensland’s March 21 election, Labor won a majority in the Parliament, meaning that Premier Anna Bligh stays in power at least until 2012. Bligh has been steadfast in her position on the state's uranium mining ban—it’s not going anywhere.
Bligh’s position is puzzling and contradictory, to say the least. It’s hardly the party line; Australian Prime Minister and Labor leader Kevin Rudd lifted the nation’s ban on new mines in April 2007. Former Labor Minister Tony McGrady and representative of Queensland’s Mount Isa district Betty Kiernan have also called for the reversal of the ban. Furthermore, the recession is touching Australia too.
In 2008, the country’s gross national product shrunk for the first time in eight years. While mining is not permitted, Queensland does allow exploration, and several companies have staked out sizable deposits, including Paladin Energy and Summit Resources’ Valhalla/Skul project and Laramide Resources’ Westmoreland/Lagoon Lake/Redtree field. The state contains an estimated A$20 billion (US$17 billion) in uranium reserves.
Bligh claims uranium mining is not worth the investment. “In Queensland [uranium mining]could not happen without a very significant injection of new money—new ports, new roads, and a range of new facilities.” The result would only be about 150 jobs, the Premier said.
Her reasoning sounds pretty flimsy. More likely, it has to do with the Queensland Labor’s fondness for the regional coal mining industry. Bligh has been a close friend to Australian coal miners during her rule, making clean coal a major part of her energy policy, recently supporting them as they try to rework the emissions trading scheme in their favor. Her predecessor and mentor, Peter Beattie, was also a strong supporter of coal over uranium.
It seems there is fear that developing the state's uranium reserves will hurt the coal industry, a prospect that seems unlikely in the near future. Can you say “industry paranoia”?
This article originally appeared in Fuel Cycle Week #319, 3/18/09
By Roger Murray, Special Correspondent, Fuel Cycle Week
The share price of Forsys Metals Corp. has plummeted since its shock disclosure last week that George Forrest International Afrique (GFI) wanted to extend the closure date for its takeover of the Canadian miner and its Valencia project in Namibia (FCW #318, Mar. 11). Forsys’ closing share price on the TSX has almost halved, from C$6.40 ($5.02) on March 10, to C$3.50 ($2.75) on March 16, showing investors’ jitters about the transaction.
Forsys said in a market release on March 13 that it had “agreed in principle” to GFI’s proposal to push back the closing date of the proposed scheme of arrangement to a date “still to be determined” but no later than July 31. Forsys reported that GFI had said “it remained committed” to the transaction but in the current economic climate “needed the additional time to complete the financing including the future investments from its preferred source of financiers”.
Forsys President and CEO Duane Parnham commented that, while Forsys had always expected to conclude that the transaction by March 18, “the relationship that has developed between GFI and Forsys during the bid process should be of benefit to Forsys in the short term”. He added that Valencia’s development “would continue as planned whilst the GFI offer remains current” but did not say what would happen if the offer were to lapse altogether.
It is this uncertainty—coupled with GFI’s indication that the additional time it needs includes the securing of “future” (rather than confirming existing) investments—that has scared Forsys investors. Now the prospect that the transaction will not go through has reinforced the widespread view, as previously reported by FCW, that GFI simply does not have the cash resources to buy up Forsys, let alone build the planned Valencia mine, without support from a third party.
One Africa watcher told FCW that all this “simply underlines the opaque nature of GFI’s operational and financial arrangements” and the near-impossibility of tracing the origin of its profits. The firm’s diversified operations in the Democratic Republic of Congo were unlikely to have generated sufficient profits to acquire Forsys and build the Valencia mine, the source added.
Reverse Break Fee Would be Substantial
Forsys’ communications to shareholders about the GFI takeover had never stipulated that
the Forrest group needed to raise funds for the C$579 million ($455 million) acquisition cost. But last week Forsys pointed out that the purchase price would remain at C$7.00 ($5.50) per share and all Forsys’ outstanding "in-the-money" options and warrants, but the reverse break fee that GFI would owe if it breaches the arrangement agreement would rise from C$11.4 million ($8.9 million) to C$20 million ($15.7 million).
In addition, by March 31 GFI would need to provide security for the entire amount of this fee in a cash-escrow deposit, letter of credit or other financial instrument acceptable to Forsys. Although the miner said it did not expect to need additional working capital before July 31, it could avail itself of the C$20 million break fee from GFI for general operating or capital expenditures, subject to GFI's prior written approval.
Forsys could also terminate the arrangement agreement and collect the existing C$11 million break fee if GFI cannot show by March 31 that is can come up with the cash by end-July. Parnham said “capital cost estimates [for Valencia] are being lowered due to lower input costs across the board together with [unspecified] optimization improvements from the engineering team”. Were Forsys to end up going it alone at Valencia, it would be good news for shareholders. That now appears to be a distinct possibility.
Another voice joined the forces clamoring for a continued role for nuclear in Scotland's energy mix: the public. In a survey of 3,000 people conducted by the government, 53% supported new nuclear generation while only 23% opposed it.
Scotland has two nuclear stations, Torness and Hunterston, which provide for about half of the country's electricity. Both stations are scheduled to close within the next 15 years. First Minister Alex Salmond has maintained a staunch anti-nuclear position, declaring that no new nuclear plants will be constructed, and that the energy shortfall created by Torness and Hunterston's expiration will be replaced by wind, wave, and tidal power.
There is certainly support for renewable energy generation in Scotland. The survey showed a preference for renewables over nuclear by a two to one margin. However, most of those surveyed were unwilling to see their electricity bills rise to pay for a rush toward nuclear (a House of Lords report estimated that the average power bill would rise £80 by 2025 as a result).
Nevertheless, many parties are dubious about the feasibility of Salmond's plan. The Scottish Council of Economic Advisors, a team handpicked by the First Minister, said last August that eliminating nuclear would make Scotland's carbon emissions reduction goals (80% by 2050) difficult to achieve, and recommended considering a role for nuclear. A report from Scotland's Council for Development and Industry also saw a place for nuclear.
For Fuel Cycle Week, the newest survey results are just another sign of an inevitable reversal of anti-nuclear views. All across Europe, countries who have previously spurned nuclear generation are reconsidering their policies, from Sweden to Italy to Scotland's neighbors in Britain. Furthermore, a new poll from YouGov on voting intentions showed Salmond's Scottish National Party edged over by Labor—a party that favors new nuclear generation.
By Nancy E. Roth, Managing Editor, Fuel Cycle Week
With varying degrees of dismay members of the nuclear industry watched last week as Energy Secretary Steven Chu nudged the comatose Yucca Mountain Project into a death spiral when he told a Senate committee that the Nevada site was no longer seen as “an option” for a national spent-fuel and defense-related high-level radioactive waste repository. Though from day one the project had been beset with political, technical and managerial problems that massively inflated its budget while crippling its progress, for well over two decades the embattled nuclear industry has counted on it in courting public support for future expansion.
But many industry participants had already begun to doubt the project’s viability when its most implacable foe, Nevada Sen. Harry Reid, ascended to the role of majority leader after the 2006 elections gave Democrats a slim majority in the Senate. President Barack Obama entered office in January having promised that he would close the project down, and his continuing political reliance on Reid in the Senate ensured that it would happen quickly.
On Tuesday, the Senate’s affirmative vote completed Congressional work on the omnibus fiscal 2009 bill, which slashes this year’s Yucca Mountain budget to $288.4 million, $206 million less than the $494.7 million that the Department of Energy requested. A Nuclear Energy Institute statement said only $145 million of that total comes from the Nuclear Waste Fund, although this year alone some $750 million will flow into the fund from ratepayers.
Nuclear Future No Longer Relies on YMP
The demise of the Yucca Mountain project would introduce major legal quandaries for the new administration, as the Nuclear Waste Policy Act of 1982 obligated the U.S. government’s executive branch to take title to the spent fuel of commercial nuclear plants—back in 1998. The White House has not spelled out how it plans to address this problem.
Nevertheless, in recent years the nuclear industry has achieved some important successes in its drive to build a public consensus favoring a new generation of nuclear energy facilities in the U.S. The passage of some 20 years with no fatal nuclear accidents anywhere on the planet has also helped dispel fears that many antinuclear groups have frequently sown to propagate their agenda over the years.
For example, in an era of growing environmental and economic concerns industry leaders have made a compelling case for the advantages of carbon-free baseload electricity, together with the job creation and tax benefits that new plants confer on their host communities. They have also managed to defang the chimerical argument that conditions new nuclear development on the completion of a final resting place for spent fuel. One of the industry’s most significant successes has been in explaining to large segments of the public why onsite storage at nuclear plants is a safe, multi-decade strategy for managing spent fuel.
The argument has brought commercial nuclear development initiatives out of the shadow of the floundering Yucca Mountain Project. This is evident in the actions of state legislatures, such as Missouri, Oklahoma and Utah, which are now considering measures to support nuclear development. Several others states, including Kentucky, Minnesota, West Virginia and Wisconsin, are mulling the possibility of lifting longstanding moratoria that required a repository for spent fuel to be available before new build could proceed.
Search for Alternatives Suspect to Some
One sign that the industry is no longer wedded to the Yucca Mountain Project is last month’s recommendation by the Nuclear Energy Institute that President Obama convene a panel of experts to develop alternatives to burying spent fuel at the Nevada site. In a speech before a February meeting of the National Association of Regulatory Utility Commissioners, Paul Genoa, an NEI policy development director, said the industry group had endorsed a plan that would allow the DOE to continue pursuing a license for the facility at Yucca Mountain while the panel examined other possibilities over a period of one to two years.
Even Harry Reid is on board with that proposal, telling reporters this week, “I am going to have a blue-ribbon panel to take a look at [other options].” The problem, he added, somewhat ingenuously, was that alternatives “haven’t been studied at all.”
Some utilities are suspicious of the “Plan B” proposal, however. One utility official told FCW he thinks it might be a “stalling tactic”. His organization saw the handwriting on the wall when Barack Obama won the presidency. “Obama cannot do anything without Reid,” commented the official, adding that utilities recognized that while Reid is in office, the repository project would never go forward.
Another industry source appeared to have lost all trust in the Obama administration and the Department of Energy. The selection of the Yucca Mountain site was “the law of the land” he said, and the administration could not ignore it regardless of its feelings about nuclear, which he thought were fundamentally negative. He was also skeptical about the NEI panel, which he thought the administration would load with members hostile to nuclear.
An Opening for Recycling?
This sentiment also appeared in another utility executive’s e-mail to FCW. “NEI has been fairly vocal in expressing the industry disappointment in the administration, and the lack of … any [proposal for a] real alternative,” the source wrote. “Perhaps someday this will be compared to the boneheaded move of…Jimmy Carter when he banned [spent-fuel] reprocessing.”
Carter put the ban in place a few years after India exploded its first nuclear device using plutonium it obtained from civilian nuclear technology. At the time global fears of further weapons proliferation seemed to offer a rationale for the ban, but today those fears seem “less credible” a fourth executive told FCW.
He wondered if the Yucca Mountain Project had in fact held the industry back, and whether ending it might open a path for more serious consideration of fuel reprocessing.
Rod Adams, author of the pronuclear Atomic Insights blog, had the most positive take on the recent developments. “We do not have a waste problem. Used fuel has too much inherent value as a future fuel source to bury away somewhere,” Adams wrote in an e-mail. “[S]pending another dime or hour on Yucca is a waste of time and money. … I hate the idea of [the government] wasting valuable time on a project with no hope of implementation.”
I am pleased to announce that Steve Hillis, of Alcoa, Tenn., whose “Miss Atom: gives me a real charge!” submittal is the winner of FCW’s first-ever (and possibly last) Miss Atom slogan contest.
While I would love to send Steve on an all-expenses-paid trip to the glamorous nuclear facility of his choice, due to budget constraints, he is getting a shout-out instead.
Thanks to all four people—and you know who you are—who participated. Only two actually submitted slogans; one of these was instantly disqualified for being mean-spirited and tasteless. A third person voted for one of our sample slogans, while a fourth voted several times for yours truly, clearly confusing the slogan contest with the actual Miss Atom 2009 contest.
The winner of that pageant was announced March 6. http://www.nuclear.ru/eng/press/other_news/2112031/
Bulgaria backed down from its plans to restart two Soviet-era VVER reactors at its Kozloduy power plant, whose shut down was among the terms of Bulgaria's admittance to the European Union. The Bulgarian government had moved to restart the units to compensate for the regional gas shortages caused by the Russian-Ukrainian gas dispute, a plan met with much squawking from the EU. Now that the plan has been abandoned, Bulgaria is asking for €700 million to €1 billion ($904 million to $1.3 billion) in compensation.
It seems like a favorable ending for everyone: Bulgaria gets to stay in the EU, the compensation package will likely be a generous one, and the reactors in question stay shut down. There is an irony to the story, though: this dispute has never really been about Kozloduy's Soviet-built reactors.
The EU is not really concerned about the safety of the Kozloduy reactors because their safety is not really an issue. The units were subject to extensive modernization throughout the 1990s and early 2000s, replacing control systems and bringing them into line with the International Atomic Energy Agency’s safety standards. After a rigorous inspection, the World Association of Nuclear Operators declared in 2003 that “operational, seismic, and design safety at Kozloduy now corresponds to the level of improvements seen at plants of similar vintage elsewhere. Many of the safety measures adopted for these plants in the design, operation, and seismic areas exceeded those that were foreseen.” WANO reiterated the safety of the reactors in 2007: “No technical reasons exist for the early closure of units 3 & 4.”
For the EU, it’s all politics. In opposing units 3 & 4, the Union is throwing a bone to the antinuclear movement, particularly in Austria.
Bulgaria also knows how to play the politics game, and a number of recent reports suggest that the plan restart Kozloduy was essentially a bluff to secure a bigger compensation package.
According to a March 7 Reuters article, “Another government official, who declined to be identified, told Reuters that Sofia actually never intended to restart the two 400 megawatt reactors, shut in late 2006 to win EU entry. ‘It was simply a move to try to demand more compensation,’ the official said.”
Indeed, the compensation Bulgaria is now requesting is significantly larger than the €550 million agreed to in 2006. Furthermore, Bulgaria was expected to negotiate its compensation package during 2009 anyway as the European Commission establishes its 2010-2013 budgets. Looks like the Kozloduy standoff has already started the process.
So, 22 years and $11 billion dollars later, the word on Yucca Mountain is in: it ain't gonna happen. The Obama administration followed through with its campaign promise to halt the project, cutting virtually all of the funding for the proposed Nevada nuclear waste storage site except for that needed for the Nuclear Regulatory Commission's review of the project's license applications. As if the message was not clear enough, a spokesperson for Energy Secretary Steven Chu told Science magazine that "nuclear waste storage at Yucca Mountain is not an option, period."
That leaves 60,000 metric tons of spent fuel and nuclear waste without a proper graveyard. With Yucca Mountain out of the picture, at least for now, flagship opponent and Senate Majority Leader Harry Reid (D-Nev) is promising to form a study group to investigate alternative disposal options. So we can expect a new solution...well, who knows when?
With Yucca Mountain discontinued, the question arises of the effect to America's nuclear future. Given the urgent need for energy independence and greenhouse gas reductions, there is no question that nuclear needs to play a greater part in America's energy mix. This is a position that the Obama administration shares. However, many states, such as California and Oklahoma, have a ban on new reactors until a permanent waste disposal solution can be found.
Then there are states like Maine and South Carolina, where spent fuel and defense-related waste is currently being stored, who are faced with having to hold on to the waste indefinitely. Other states that are already home to waste disposal sites, like Washington with its chronically mismanaged Hanford Reservation, are nervous that the waste intended for Yucca is going to get dumped with them.
Unsurprisingly, there is a fair amount of praise for the decision coming out of the Nevada media. Admittedly, some reasonable points have been brought up. The Nevada Appeal posed a very fair question in an editorial, inquiring as to which representatives who supported Yucca Mountain would now step up to offer alternatives in their own states. It will be interesting to find out.
One is also moved to wonder why, in the long and controversial history of the Yucca Mountain project, there is so little in the way of a backup plan. It speaks to a certain bureaucratic madness that now, 26 years after the Nuclear Waste Policy Act was enacted, we are back to square one.
It's hardly breaking news to dub the ever ongoing construction of the Olkiluoto-3 reactor in Finland one of the nuclear industry's most prominent problem projects. The newest figures (from builder AREVA's 2008 fiscal year report) tallied the estimated loss on the project at about €1.7 billion ($2.1 billion), and providing a targeted start up date of 2012—three years behind schedule. Back in 2003 when AREVA and partner Siemens signed on to build the reactor, the contract was worth €3 billion. The persistent sniping between AREVA and Finnish utility Teollisuuden Voima Oyj doesn't make the picture look any brighter. Each party blames the other for the delays and is demanding various amounts of compensation.
Though the continuing Olkiluoto debacle has put a €749 million ($946 million) dent in AREVA's 2008 profits, the French giant is still on pretty good footing, with a 21% growth in its order book and almost 10,000 new hires last year. More importantly, the troubles at Olkiluoto seem not to have decreased the interest in the EPR, AREVA's third generation reactor design, of which Olkiluoto is the first to be constructed. The EPR model is set to play a major role in both Italy and England's nuclear revivals, among others.
However, AREVA received a bigger blow at the end of January when Siemens announced its departure from AREVA NP, the nuclear technology joint venture handling Olkiluoto-3. At the beginning of March, Siemens declared its intention to join with Rosatom in a new nuclear-related joint-venture.
While business details on the new JV are sketchy at this point, it would seem that Siemens is angling for the best possible position to take advantage of the inevitable moment when Germany finally embraces a nuclear future. Throwing in with Rosatom gives Siemens access to the Russian firm's financing and supply resources. It also plays to Russia's strong influence on Germany's energy policy. For Rosatom's part, the deal also works out nicely, providing some much needed credibility outside the former Soviet Union’s sphere of influence. The participation of Siemens will certainly make any new reactor designs developed by the partnership more palatable to Western and Asian markets.
It doesn't work out so well for AREVA, who must purchase Siemens' 34% stake in AREVA NP, valued at €2.05 billion ($2.61 billion), before the end of January 2012. And it certainly makes more difficult any French plans to enter the German market when it finally opens.
AREVA is now challenging the Siemens-Rosatom partnership, claiming that the deal is in breach of the AREVA NP agreement, which forbids Siemens from competing with AREVA until 2020. As such, the claim seems hard to dispute, as Rosatom is definitely a major competitor. It will be interesting to see how this dispute develops, and what the blowback will mean for the Olkiluoto project.
Greenpeace: Crying Wolf
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
However, there is a global revolution occurring in the way we think about energy that includes both a renewed interest in nuclear generation and a heightened attention to the environment, and it is obvious that neither nuclear nor Greenpeace is going anywhere. So I dare to ask, why can't we all just get along?
Well, one reason is Greenpeace's tendency to ceaselessly cry wolf. Lately, the organization has been blowing a gasket about a large shipment of MOX fuel soon to depart on two ships from Cherbourg, France, to Japan, where they will be used in three reactors.
According to Greenpeace, this is the largest shipment of plutonium in history, containing 1.8 tonnes (3,968 lbs) of plutonium, though it is uncertain where these numbers come from as supplier AREVA has not disclosed the details of the shipment. Their worries concern the potential environmental effect should the convoy experience an accident at sea, or that the shipment could be seized in transit by a terrorist force who could extract the plutonium for use in nuclear weapons. Greenpeace activists tried to prevent a similar convoy from leaving Cherbourg for Japan in 2001. The organization did not say if any action was planned for this shipment.
Both of the situations feared by Greenpeace would indeed be bad news. The problem is that the likelihood of these situations is remote to the point of morbid fantasy. The two ships are both armed with weapons and carry a specially trained security force, and the convoy's route will not be revealed until the ships have already departed. The possibility of seizure by a terrorist force with the knowledge and resources to extract the plutonium from the assemblies and build atomic bombs seems, shall we say, distant. As for an accident at sea, this speaks to factors beyond the realm of human control that are inherent in all shipping proceedings, or for that matter, all human undertakings.
Greenpeace and the nuclear industry are never going to be fast friends. Greenpeace does not like nuclear energy, and it will be a long time before it comes around (if ever). But in creating an uproar over non-issues like this one, the organization sacrifices its credibility and undermines any legitimate criticism it might have of the not-infallible nuclear industry, relegating itself instead to the role of the boy who cried wolf.
Other People’s Money: Some Miners Don’t Want It
By Nancy E. Roth
TORONTO—The single most convincing presentation I heard at the PDAC uranium panel yesterday came from Bill Boberg, president and CEO of Ur-Energy. With a debt-free war chest of C$65 million and expected project costs of around C$45 million, the miner is in the fortunate—and unusual—position of not needing other people’s money to leverage its project into production.
In the current cash pinch Ur-Energy has pared back its exploration efforts to focus primarily on achieving a Q4 2010 startup at its Lost Creek in-situ project in Wyoming’s Great Divide Basin. When fully ramped up, Lost Creek, with an NI 43-101-compliant indicated resource of 9.8 million pounds of U3O8 (plus 1.1 million inferred), will yield 1 million pounds per year at a cost of US$23/pound.
That assumes Ur-Energy gets the needed permits from the Bureau of Land Management, the Nuclear Regulatory Commission and the Wyoming Dept. of Environmental Quality by Q4 2009. It’s not a foolproof timetable, but not unrealistic, either; Ur-Energy was one of the first U.S. uranium miners to file for an NRC mining permit in late 2007.
I’ve become so used to hearing about miners’ search for backers that I asked a rather simpleminded question of Wayne Heili, vice president of mining and engineering, back at the miner’s booth. He shot a puzzled glance in my direction when I asked if he expected that uranium production would help draw investment to the company.
Attracting investors is not on the miner’s agenda right now, he patiently explained. The problem with investors is, once you start making money, they want some of it.
“Why would we want to give anything away?” Heili asked.
Its current stakeholders own roughly 99.5 million fully diluted shares outstanding. Once Ur-Energy manages to open the revenue tap, they will be the beneficiaries.
Recession and Uranium
By Nancy Roth
TORONTO—“We assure you that this is a bad recession but not another Great Depression,” said Gavin Graham, BMO Guardian Funds, at the end of his PDAC presentation.
Graham had literally bounced up and down on the dais as he energetically outlined his thesis. What is happening now in commodities markets across the board was merely an interruption, not a reversal, of the ever-increasing demand from emerging Asian economies that would continue to generate market growth for a long time to come, he insisted.
Whatever else has happened, growth in Asia has not suddenly begun running on empty in the last few months, not after all these years of urbanization and industrialization that have raised the expectations of Chinese and Indian consumers and businesses. No one who has moved into town to become a wage earner or entrepreneur in the modern economy is going back to subsistence agriculture. That’s why, Graham said, demand for commodities and products in China and India would keep ratcheting up—at a pace that is slower than before—but by Western standards it is still dizzying.
The upshot for investors, he said, is that market and stock prices have slumped back to the level of a few decades ago, before the for-fun-and-profit money gods had artificially pumped them up across the board. But the elevated demand from Asia that first started the most recent boom cycle for commodities is not going away, and neither will the commodities market. Not for long, anyway.
Yeah, but Uranium…
Now, as we’ve said innumerable times, for many reasons uranium does not necessarily follow the rules of supply and demand that govern other markets. But it is not totally disassociated either. For example, the uranium market did participate in the most recent boom—probably more because of investors’ optimism regarding nuclear industry expansion than anything else. But certainly the boom-driven commodity investors’ restless search for the next new bandwagon didn’t hurt.
So, where does that leave uranium? Well, Fuel Cycle Week has no crystal ball but because uranium has such specialized applications, the recovery of the uranium market will hinge on global nuclear growth (d-d-duh), which is only indirectly linked to the growth in demand for consumer and industrial products—and energy—in Asia.
If Graham’s thesis about the general commodities market proves correct, uranium market growth will come along more slowly and be less consistent, until buyers and investors are convinced that new nuclear development can, and will, actually happen.
“Utilities—But Not Western Ones”
By Nancy Roth
TORONTO—The economic climate for uranium miners participating in this year’s Prospectors and Developers Association Conference is at least as chilly as the -27˚C in Toronto this morning. Investment and credit have frozen in place and many North American miners have shuttered their most cash-intensive activities and pushed back their permitting timelines.
But several are still here plugging their projects, even with stock values at a tenth or less what they were last year. I counted at least 26 that are manning booths on the vast exhibition floor, including First Uranium, Fronteer, Hathor, Pele Mountain, Purepoint, Quest, Rio Tinto, Titan, Ucore, Universal, Ur-Energy and Uranium Star. Meanwhile Khan, Pitchstone, Tournigan and U3O8 haven’t bothered with booths but are slated to deliver presentations about their projects in this afternoon’s uranium session.
Many appear to be in the situation of Al Shefsky, president and CEO at Pele Mountain Resources, who told me yesterday that to restart operations at his Elliot Lake project he’s looking for a partner. Pele Mountain owns the last known near-surface deposit where Rio Algom and Denison turned out millions of pounds of U3O8 before the great uranium drought.
Any nibbles? Apparently.
“Utilities,” he said. “But not Western ones.”
Why am I not surprised?