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By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Canada's Bruce Power is dropping its efforts on two projects in Ontario: the addition of a new reactor complex at the Bruce nuclear station and the construction of a new plant at Nanticoke. Bruce will now refurbish its Bruce A and B complexes, each consisting of four reactors, adding 6,300 MW of electricity to Ontario's power grid. The company cited the slowed growth in energy demand brought about by the global economic recession as the reasoning for its decision.
However, Bruce's plans are also doubtlessly influenced by a shift in thinking about nuclear in Ontario following the province's failure to secure a reasonable deal with state n-firm Atomic Energy of Canada Ltd. for a new reactor at Darlington. This failure, combined with the near simultaneous malfunction of AECL's Chalk River medical isotope producing reactor, led Canadian Prime Minister Stephen Harper to move toward a restructuring of the company. The research and development arm will be split from the commercial generation arm, with private ownership sought for the medical isotope business and major private investment desired for the commercial reactor wing.
The province's energy plan calls for the addition of 14,000 MWe of nuclear capacity to the power grid. But with work on the Darlington reactor now on indefinite hiatus and Bruce's announcement, the plan is sure to change. Where nuclear new build will stand is yet to be determined; certainly, its ground is much less solid.
As potential nuclear projects flicker out in Ontario, attention is shifting toward the neighboring province of Saskatchewan. The province is looking into the establishement of a new nuclear facility, as well as the development of a medical isotope producing research reactor. Saskatchewan's mammoth uranium resources--about a quarter of the world's known supplies--make it an intuitive choice for a nuclear plant. The province has also weathered the economic downturn better than most, even running a surplus, which makes the idea of an expensive investment like a nuclear plant less frightening.
Both AECL and Bruce Power have expressed interest in working on a Saskatchewan reactor. The emergence of this prospect provides AECL with another opportunity to create a precedent market for its next-generation ACR-1000 reactor technology, which without a high-profile project in the near future is dead in the water. The question is now whether the company can work out a deal with the province that is logisitically and economically feasible, a challenge that it has been unable to rise to in Ontario.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
The proposed third reactor at Constellation Energy's Calvert Cliffs plant in Maryland is one of the most promising new build projects in America today. Not only has the project won the approval of the state Public Service Commission, but it has also been named as a finalist for the Department of Energy's coveted loan guarantees. However, the project has hit a snag-- or, more accurately, a tangle.
The mess revolves around Constellation's plan to sell 50% of its nuclear assets to Electricité de France for $4.5 billion, the existing and prospective Calvert Cliffs units included. Charging that the deal could have negative implications for ratepayers, Governor Martin O'Malley (D) and the PSC are reviewing the EDF-Constellation deal to make sure it is in the state's best interest. The fear is essentially that EDF would use Constellation to pump money out of energy customers through its fully owned subsidiary, the utility Baltimore Gas & Electric. Constellation contested the review, but so far courts have ruled with Maryland.
In the meantime, Constellation and O'Malley are engaged in dizzying negotiations over the terms of the EDF deal. Constellation's latest offer agrees to delay an electricity rate hike until next January, and hold that hike to 2.5%, half its intended increase. O'Malley says the offer doesn't go far enough. For his part, O'Malley is asking for a slew of other things, including a one-time credit to customers worth about 10% of their yearly bill, annual payments to a program aiding low-income Marylanders with power bills, and transparency regarding a potential payment to Constellation CEO Mayo Shattuck III that could be triggered by the EDF deal.
The issue at the heart of this is not the terms of Constellation's settlement with O'Malley, it's whether EDF investment in Constellation is harmful to ratepayers. The fact of the matter is that it is not. EDF is taking a minority stake in Constellation. EDF will have only one person on Constellation's board of directors, and this person will have no non-public information about BG&E, nor will it vote on issues relating to BG&E.
Maryland has seen steeply rising power prices since the removal of rate caps in 2006, making the issue of keeping utility costs down a politically attractive issue and occupying a central role in O'Malley's campaign. Now the governor is using the Constellation-EDF deal as an opportunity to wrangle a utility aid package out of a private company.
It's a tasteless move. A report from investment firm Jeffries & Co. predicted that Calvert Cliffs 3 will be impossible to build without EDF's investment. Furthermore, the DOE's selection for loan guarantee recipients is based to a great extent on the likelihood for a project to run smoothly, and the bickering in Maryland can't look very attractive. The real shame is that O'Malley stands to derail a reactor that could provide his state with much needed energy and jobs, and whose absence would be regrettable indeed.
This article originally appeared in Fuel Cycle Week #339, 7/22/09
By Dan Yurman, Contributing Reporter, Fuel Cycle Week
Exelon Corp. gave up the ghost on July 21 after a ten-month struggle to execute a hostile takeover of NRG Energy, Inc. in a $7.8 billion all stock deal. At the company’s annual meeting in Princeton, N.J., NRG’s stockholders swept the field rejecting Exelon’s slate of nominees for the board of directors. The action came after Exelon raised its offer 12.4% to 0.545 shares of Exelon stock for each share of NRG stock.
The die may have been cast for the vote months ago when NRG’s largest shareholders, each owning at least 5% of the stock, began to question the value of Exelon’s offer.
Shareholders Doubted Value of Offer
One key shareholder, New York-based Solus Alternative Asset Management, balked at the sale last February. Solus President Christopher Pucillo sent a letter to NRG Chairman Howard Cosgrove saying the Exelon offer did not maximize shareholder value. He called Exelon’s bid “highly conditional” and said it undervalued NRG. Solus at the time owned a 6% stake.
Shortly after Exelon raised its bid NRG sent a letter to its stockholders reiterating its opposition to the merger and urging them to reject the bid because it offered too low a price for the company. Wall Street analysts apparently agreed and were quoted in NRG’s letter as saying the stock is currently selling at a substantial discount, especially considering NRG’s potential for future growth.
In the run-up to NRG’s annual meeting, Exelon’s troubles intensify. On June 26 MFS Investment Management, one of NRG’s larger shareholders, said NRG’s stock has gone up since Exelon made its hostile bid for the firm last fall.
Maura Shaughnessy, manager of the MFS utility fund, told Bloomberg, “Exelon will have to pay much more or the deal won’t go through. I think Exelon is in a bind.” MFS owned 4.6% of NRG’s stock at the time. The New York Times reported July 11 that Proxy Governance, an influential voice on corporate takeovers, advised NRG and its stockholders not to accept Exelon’s offer for similar reasons.
Exelon CEO John Rowe issued a terse statement accepting defeat. According to the Wall Street Journal he said, “The NRG stockholders have spoken and Exelon will move on.”
Exelon’s M&A Growth Strategy
This was Exelon’s third failed takeover effort in the last six years. In 2006 it tried to acquire New Jersey Public Service Enterprise Group for $17.8 billion after having aborted plans to acquire Dynergy’s Illinois Power Co. in 2003. In both cases, Bloomberg reported, the deal fell through because of legislative or regulatory barriers.
An Exelon official at the Nuclear Energy Institute Nuclear Fuel Supply Forum on July 21 told FCW that the takeover attempts were consistent with Rowe’s business strategy of achieving growth through mergers and acquisitions.
In the case of Exelon’s pursuit of NRG, the stockholders flat out rejected the offer as being inadequate even after the big utility sweetened it.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Brazil and Russia signed an agreement yesterday pledging cooperation in the fields of reactor development and uranium exploration technology.
Though the nation's modern day nuclear program is still in its early stages, Brazil's ambitious new build agenda, generous uranium resources, strong economy, and positive international relations position the country to become a significant presence in the global nuclear market. As a Nuclear Non-Proliferation Treaty signatory and a member of the Nuclear Suppliers' Group, Brazil is already accepted in the global nuclear fold. "We're planning to build eight new nuclear power electric power plants," said Brazilian Deputy Foreign Minister Samuel Pinheiro Guimaraes. "We praise Russia's participation in carrying out this program."
The chances of a Russian-built commercial nuclear reactor in Brazil, however, look pretty slim. The nation has already tapped AREVA to complete the third unit at its existing Angra station, and rumor is that Westinghouse's AP-1000 model is a favored choice for other prospective plants. French firm GDF-Suez also announced its interest in Brazil's nuclear sector. Where Atomstroyexport's VVER-1000 model has competed against French and American-made reactors in foreign markets, the Western models have usually been the winners.
Cooperation on research reactors, also discussed in the accord, is more likely.
More probable is a Russian influence in the development of Brazil's uranium industry. Though Brazil boast's the world's sixth largest reserves, the country has kept most of its resources to itself. Producing uranium mines are largely controlled by state-firm Industrias Nucleares de Brazil, which has opted for private Brazilian companies over bigger-name international firms to serve as project partners. Current regulations allow only 20% of uranium production to be exported. However, Brazil's plans to enrich uranium for commercial use by 2012 mean this policy is soon bound to change. Only eight other countries can enrich uranium, and this capability, coupled with Brazil's reserves, promise serious profits.
The Russian interest is nothing new. In October, Rosatom offered exploration assistance to Brazil, promising that its cutting-edge mining methods and technology could increase Brazil's resources several-fold. In Brazil's uranium sector, Russia sees not only the chance for involvement in a profitable new market, but the opportunity to increase and consolidate its already enormous power in the global supply of enriched uranium.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
A region in the earliest stages of its 21st century nuclear plans, the Baltics, like the Middle East, is getting attention from foreign firms hoping to penetrate a market where nuclear business relationships are not yet well established.
A case in point is the situation of Lithuania's planned Visaginas plant. Conceived as a replacement for the Soviet-era Ignalina station, ordered shuttered by the European Union as a term of Lithuania's accession, Visaginas is to be a cooperative project between Lithuania, Poland, Latvia, and Estonia. However, progress on the project has been slowed by bickering among the parties, who have yet to reach an agreement on the split of Visaginas' output. The facility's initial planned capacity of two 1,600-MWe reactors would be too small for each nation to get its desired share. With Lithuanian state-utility LEO's newest plans calling for only one unit, someone is sure to be cut out.
Recent signs indicate that the states are looking elsewhere for their nuclear needs. Estonia is investigating the prospects for a nuclear plant of its own, including a reported interest in Westinghouse's still in-development IRIS reactor. Poland is also looking into its own nuclear station, conducting talks with both established European nuclear power France and South Korea, an up and coming 21st century nuclear provider.
Changes are also underway in Lithuania. Top executives of Mitsubishi Heavy Industries visited Vilnius this week to talk with Prime Minister Andrius Kubilius about participation in the Visaginas plant. MHI's presence signals a reconsideration of the project plan, which had previously identified European heavyweights EDF, E.On, RWE, and Vattenfall as potential builders.
"We have discussed the possibilities of Mitsubishi to participate in the realization of various projects in Lithuania. This is one of the largest companies producing nuclear reactors in the world. We think that this is an occasion for the development of stronger business connections," Kubilius said.
The open environment of the Baltic nuclear market is exactly the sort MHI is looking for. The company has a large presence in the international nuclear sector, though often as a partner or manufacturer, and is searching for opportunities to ascend to the next tier of nuclear vendor. Interest from countries outside the region may also have a certain appeal to the Baltics, providing a neutral path amidst the power pulls of Russia and the European Union.
This article originally appeared in Fuel Cycle Week #338, 7/15/09
By Roger Murray, Special Correspondent, Fuel Cycle Week
Russian President Dmitry Medvedev’s four-day, four-country trip to Africa in late June produced a plethora of bilateral agreements on nuclear cooperation, energy, infrastructure and trade with Egypt, Nigeria, Angola and Namibia. It was Medvedev’s first visit to the continent, and he brought with him a 300-person trade delegation.
Analysts widely viewed Medvedev’s primary intention as beefing up Russia’s position as a major bilateral partner on the continent, as well as catching Russian firms up with Western and Chinese firms in securing access to African natural resources—especially uranium, oil and gas. China has stakes in uranium ventures in Niger and Namibia (via investment in AREVA’s Trekkopje mine), while mainly Australian and Canadian juniors have spearheaded yellowcake exploration.
Medvedev carefully selected African countries with which Russia already has close political, or economic and trade links. The BBC commented that Medvedev’s African safari came “at a time when Russia is trying to strengthen its global strategic role.”
Egypt is Russia’s top trading partner in Africa, and political and military ties have been strong since the 1960s presidency of Gamel Abdul Nasser. Although Russia trades little with Nigeria—nor does it need the country’s crude oil exports—Nigerian authorities regard Russia warmly because it supplied the Nigerian federal government with armaments during the civil war of the 1960s, enabling the government to prevail during the Biafra secession.
Similarly, Russia enjoys close political ties with the ruling parties of both Angola and Namibia, which both received political and financial backing, along with weapons, when engaged in their armed liberation struggles against Portugal and South Africa, respectively. Those ties have endured over the decades.
Namibia: Accords Many, U-Deals None
In Namibia Russia sought deals on oil and gas as well as uranium. The official joint communiqué issued after Mevedev’s meeting with President Hifikepunye Pohamba on June 26 noted that the development of natural resources, infrastructure and energy were among the “priority areas of bilateral cooperation.”
The communiqué added that the two countries had reached agreement “on the expansion of Russian investments to develop and introduce new large-scale projects in the Namibian economy, in particular in mining, oil exploration and energy.”
Mevedev’s visit has apparently paved the way for a significant increase in economic and financial links between Namibia and Russia.
Andrei Sharonov, managing director of the Troika Dialog Group, Russia’s largest independent investment bank, was a participant in Medvedev’s delegation. “My trip to Namibia is meant to introduce members of the Russian delegation to [Namibia’s] Standard Bank and to explore opportunities for financing Russian companies’ projects in the country,” he told reporters. Sharonov emphasised the interest expressed by Russian businesses in partnership opportunities in Namibia, “both in terms of mineral resources as well as participating in power and infrastructure projects”.
Standard Bank, which is one of Namibia’s four commercial banks (all South African-owned), announced at the end of June that it would join with Troika to “create an international platform to connect Russian clients to Africa and other emerging markets.” The Namibian bank recently announced plans to become a 33% stakeholder in Troika, in one of several proposed business partnership.
But no new uranium agreements were reported during Medvedev’s brief visit. Local media only had limited access to the official events, and the joint communiqué was vague on specifics. Russia’s previous offer of a floating nuclear power plant, which Kirienko offered during a 2007 visit, was not on the agenda for this trip, Russian ambassador in Namibia Nikolai Gribkov confirmed to the local media.
Russia’s only current involvement in the Namibian uranium sector is via the locally registered SWA Uranium Mines, which holds two exploration licenses in the Erongo region. Both are due to expire next year. The majority owner of SWA Uranium Mines is now the Moscow-based private mining investment group Arlan, which holds a 75% equity interest.
The other two shareholders, each with 12.5%, are Vneshtorgbank (VTB) and Atomredmetzoloto (ARMZ); ARMZ and Arlan have acquired the shares previously held by Techsnabexport (Tenex) and Renova respectively, which were part of the original joint venture established to mine uranium in Namibia three years ago, according to The Namibian daily newspaper. However, there have been no reports of exploration work.
In addition the Namibian government now requires mineral exploration license holders to form partnerships with local black economic empowerment partners as a condition of relicensing. This happened recently in the case of license extensions granted to Australia’s Deep Yellow (FCW #333, June 24). It remains to be seen whether the government enforces the rule when Arlan’s current licenses expire.
Westerners Generate Economic Benefits
While for political reasons the Namibian government is keen to diversify involvement in uranium mining and exploration beyond Western-owned firms, Russia can offer little in terms of finance and technical expertise that is not already available.
For example, Rössing Uranium recently published its 2008 Report to Stakeholders, which disclosed that out of N$2.8 billion ($339 million) net income last year, the government had received N$935 million ($113 million) in income tax and payments for services to state-owned utilities. Employees gained N$455 million ($55 million); shareholders N$342 million ($41 million); and N1.1 billion ($133 million) were reinvested in the company.
In addition, Rössing payments for goods and services amounted to N$2.3 billion ($278 million) in 2008, of which N$1.45 billion ($176 million) or 62% went to Namibian suppliers.
The report added that Rössing remained committed to expanding annual output to nameplate capacity of 4,500 tonnes U3O8 by 2012 and that under its strategic production planning process the current focus is on evaluating the feasibility of a heap leach processing plant to treat currently uneconomic ore, to sustain operations until 2021.
Egypt: Inside Track for Nuke Tender?
Russia appeared to score a success in Egypt, where it has been invited to participate in the tender for the construction of Egypt’s first nuclear power plant at El-Dabaa. Accompanying Medvedev was Rosatom Director General Sergei Kirienko, who told Russian news agency Itar-Tass that the tender would “most likely” be called for in late 2010.
The planned 1,000-MWe El-Dabaa plant, a combined nuclear reactor and desalination plant on the coast, is slated for construction by 2015 at an estimated $1.5-2 billion cost and is open to foreign participation. Egypt recently awarded a contract to Australian engineering consultants Worley Parsons to select the reactor technology, choose a plant site, organize training and provide technical services.
Egypt had announced plans to develop nuclear energy in 2006 and Egyptian President Hosni Mubarak signed a bilateral accord on the use of nuclear power for peaceful purposes during his 2008 visit to Russia.
Last month Russian and Egyptian officials signed a bilateral uranium exploration and mining agreement. Kiriyenko told the press that Egypt had “very promising uranium deposits” and would cooperate in uranium prospecting and development.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Soon-to-be Bulgarian Prime Minister Boiko Borisov announced the temporary suspension of the Belene nuclear plant project shortly after the victory of his Citizens for European Development of Bulgaria (GERB) party defeated the sitting Socialist government on July 5 . Borisov was quick to clarify that the suspension did not indicate a lack of commitment to Belene. "We have the permission of the EU and to miss the opportunity of having a [nuclear] plant would be what I would call a crime against the state," Borisov said during an interview on Nova TV.
Rather, all major investment projects will be frozen while the new government assesses the country's financial standing and decides which projects to continue and which to postpone. The South Stream gas pipeline project was also frozen.
Borisov accused the previous government and its Economy and Energy Minister Petar Dimitrov of failing to take Bulgaria's economic crisis into account as it signed on to new, investment-intensive projects. Suspicions of corruption were not infrequent, including the apparent disappearance of BGN500 million (US$361 million) in the preparation of the site for Belene. "The last government managed the energy sector without any transparency. According to GERB, this sector has not been reformed and the new government will pay special attention on it," said GERB Economic Advisor Biser Boev.
As to Belene in particular, the new government was clear that Bulgaria could not guarantee the price of the project and that funding would have to come from private sources. With international banks shying away from Belene, this means Russia, who have promised Bulgaria the €3.8 billion (US$5.5 billion) loan it needs to build the reactors. However, the Russian Ministry of Finance said the loan would not be granted for at least six months while the conditions of credit are sorted out. RWE, the 49% partner in Belene, has been waiting for Bulgarian utility NEK to sort out its financing arrangements before coming up with its own money. Boev said negotions with RWE would be accelerated.
The suspension of Belene may feel like yet another weight sinking the project toward eternal limbo, but in the long run, this may be good news for the plant. Bureaucratic entanglement and poor planning has stalled Belene again and again. A house cleaning may be the crucial step to move the plant off the drawing board and into real life.
This article originally appeared in Fuel Cycle Week #337, 7/8/09
By Roger Murray, Special Correspondent, Fuel Cycle Week
On July 2 Australia’s Extract Resources announced a 34% increase in the resource estimate for Zone 1 of its Rossing South deposit in Namibia.
Based on drilling and chemical assay data completed to June 2009 and compliant with Australia’s JORC code, the overall resource is now estimated at 145 million pounds (65,770 tonnes) U3O8 at a 100 ppm cutoff, up from the initial resource estimate of 108 million pounds (48,988 tonnes) published in January (FCW
#312, Jan. 28).
Extract noted that the overall resource grade had increased to 449 ppm (0.045%), compared to 430 ppm (0.043%) previously, and that 20% of the contained uranium metal—24 million pounds (10,886 tonnes)—is now classified as indicated.
The company added that it expected Zone 2’s initial resource estimate to “propel Rossing South into the top 10 global uranium deposits” by contained metal, with both Zone 1 and Zone 2 mineralization still open along-strike and down-dip “with extensive exploration potential still to be tested.”
Extract’s Managing Director Peter McIntyre confirmed that the Zone 2 initial resource was on track for August 2009, predicting that the company would “establish an even larger resource base over the next two months and position Rossing South amongst the best of the world’s uranium deposits.”
He added: “This resource base is expected to support a long-life, large-scale open-pit mining operation and a feasibility study is in progress to quantify this potential.”
An equally enthusiastic response to the Rossing South resource update came from Extract’s largest shareholder, AIM-listed Kalahari Minerals, also on July 2. Its Chairman Mark Hohnen said: “The 34% increase in resource for Zone 1 to 145 million lbs of U3O8 in line with our estimates. Additionally we were hugely excited about the increase in grade which makes Rossing South the highest grade granite hosted uranium deposit in Namibia.”
Hohnen Warns Off Rio Tinto
The latest resource update for Rossing South, coupled with a likely further substantial boost to the deposit’s overall size in August to above 200 million pounds (90,720 tonnes), make it likely that Rio Tinto will continue stalking both Extract and Kalahari.
The Anglo-Australian resources group already holds substantial minority stakes in both firms, but Hohnen is determined that any purchase of either company would only be on terms that reflect the commercial potential of a Rossing South mine.
In the July 3 Mining Journal, Hohnen was quoted as saying: “If Rio wants to be in a joint venture to develop Rossing South, or wants to take over Extract, it must be only on a commercial basis.”
Hohnen also explained the decision to call off the planned merger between Kalahari and Extract late last year. “We were very worried that they (Rio Tinto) could go to 30% of the merged group under the UK (takeover) rules,” he told the London-based weekly. We asked Rio to enter into a voluntary handcuff agreement where they would not increase their holding until we were able to talk through these issues; Rio was not prepared to do that. On the back of that, some of our shareholders just said they were not prepared to vote for the merger because there was just too much of a risk of Kalahari getting into a bear hug.”
Polo Chairman Agrees
Polo Resources executive chairman Stephen Dattels has made similar comments. Dattels joined Extract’s board last month, as the South African-based concern holds a 10% direct equity interest in the firm. Other companies that he is connected to, namely AIM-listed Niger Uranium and Emerging Metals, also own a combined 25% interest in Kalahari, equivalent to a further 10% indirect interest in Extract (FCW #330, June 3).
Mining Journal reported that in a recent interview (with another publication) Dattels said: “Why should Rio Tinto be able to muscle the shareholders of Extract and Kalahari around to suit its own benefit? In my view there is a much better alternative, which is to have both companies sold to the highest bidder.”
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
Traffic lights blinked out and shopping malls went dark in northern Germany this weekend as a transformer malfunction caused an emergency shutdown at Vattenfall's 25-year old Kruemmel nuclear plant. The incident occurred just one week after Kruemmel's reopening, after two years of repairs following a 2007 transformer fire. The company revealed this week that a device that monitors partial discharges of power at the transformer had not been installed.
Both of Kruemmel's transformers must now be replaced. It will take the new transformers until next spring to arrive, Vattenfall said, and even longer to obtain proper permissions and install the new gear. In the meantime, the company will conduct a full inspection of the Kruemmel reactor. This week, the reactor vessel will be opened for an inspection of the 80,000 fuel rods, one or more of which the company believes may have been damaged during the incident.
"We are aware that we have lost trust again," said Vattenfall Chief Tuomo Hatakka. "We'll have to earn it anew." Indeed, Kruemmel's failed restart not only interrupts the utility's operations--Vattenfall loses about €1 million (US$1.4 million) in operating income each day that Kruemmel and its other halted plant, Brunsbuettel, is not running--but also tarnishes the company's reputation.
In Vattenfall's home country of Sweden, the government demanded an account of its work to improve safety, and the nuclear safety agency contemplated more intense supervision of the utility's operations. On Wednesday, the government ordered Vattenfall to improve safety at the Ringhals plant, which has chalked more than 60 safety incidents.
In Germany, anti-nuclear advocates seized on the Kruemmel shutdown as a reason to close Germany's fleet of reactors. "It's time to switch off the Kruemmel plant," said Vice-Chancellor Frank-Walter Steinmeier, a member of the Social Democratic Party. The incident even drew frustration from nuclear supporters such as Peter Harry Carstensen, State Premier of Schleswig Holstein, where Kruemmel is located. "If there is one more incident like this, I will see to it that this power station is shut down."
Clamor over Kruemmel plays out against the background of a larger nuclear debate within Germany. Under the leadership of former prime minister Gerhard Shroeder, Germany decided in 2000 to close its 17 reactors by 2020. Current Chancellor Angela Merkel is warmer to nuclear power, and encourages continuing its use. As national elections at the end of September draw closer, Merkel's Christian Democratic Union has backed away from the prospect of building new plants, but continues to advocate extending the lifespan of existing reactors. Nuclear is not popular in Germany, but high power prices have lately started to soften the resistance of the populace.
In this light, the Kruemmel debacle speaks not only to Vattenfall's irresponsibility and ineptitude, but harms the case of nuclear in general. It is almost certain that Germany will find a reason to continue operating its nuclear plants, as there is at this time no apparent replacement for the generation they provide.The damage is really dealt in the case for nuclear as an enduring option, distancing its chance to play a role in the next generation of German power.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
AREVA announced plans to sell a 15% share in the company last week, citing need "to pursue an ambitious investment program to take advantage of its growth." The sale will lower the French government's stake from its current 93% down to 78%. In addition to seeking investment from other businesses, the company is starting an employee shareholder program.
AREVA is also looking into selling off some of its other holdings, most importantly its Transmission and Distribution division. A call for bids is expected, with a final decision regarding if and when to sell the T&D wing to follow. The firm's 72% share in AREVA T&D India Ltd., the division's Indian arm, will also be offered for sale. Its stakes in French miner Eramet and Swiss electronics firm ST Microelectronics will also be offered up.
The sale will generate about €
14 billion (US$19.6 billion) in capital, steeling AREVA to maintain its prominent status in the ever more vital nuclear market. Much of the money will no doubt be directed toward the continued development of the firm's third generation EPR reactor. The company's maiden EPR project, Olkiluoto 3 in Finland, has encountered problem after problem, leading to a three-year delay in the target start-up date. Cost overruns from the Finnish project contributed to the 21% decline in AREVA's profits during 2008.
Speculation as to who might grab this stake is wide. Mitsubishi Heavy Industries confirmed its interest. The company seems a likely contender, given its ties to AREVA in nuclear fuel and the development of the medium-sized Atmea reactor. Strengthening ties to the French giant would prove advantageous to MHI, likely boosting its competitive power as a reactor supplier.
Other French energy firms like EDF, GDF Suez, Total, and Alstom are also likely contenders. Germany's Siemens has been raised by some sources, but we think this is unlikely. AREVA previously blocked Siemens' attempt to raise its 34% holding in reactor division AREVA NP, and now hopes to buy back this stake. According to The Financial Times, the French government has also talked to certain Middle East-based sovereign wealth funds about an investment deal.
AREVA stocks rose 8% following the announcement of the offering.
By Jacob Mazer, Assistant Editor, Fuel Cycle Week
The government of Ontario promised a decision in June regarding plans for the proposed Darlington nuclear power plant. True to its word, on June 29 the province announced it: the Darlington project has been put on hold.
Of the three firms vying for the Darlington contract, only state-owned Atomic Energy of Canada Ltd.'s bid met the specifications for the project, Ontario's government said. However, Energy Minister George Smitherman said AECL's price tag was "billions" above what the province was willing to pay. The sum remains undisclosed, but estimates place the minimum price for the twin reactor plant at $15 billion.
What were the bid criteria? Prime Minister Stephen Harper told AECL that its bid must provide a commercial rate of return and a price that recovers all costs. The ever present expectation cost overruns-- a chronic problem in AECL's history-- looms over Harper's order, and accounting for such explosive project costs no doubt led to the high figure presented to Ontario.
The specter of budget busts future figures strong in the province's picture as well. According to Smitherman, the inclusion a liability framework for cost overruns in AECL's bid was the factor that gave it an edge over bids from Westinghouse and AREVA. Here the picture starts to get fuzzy. The record of cost overruns for Ontario nuclear projects is no secret, and its hard to believe that AREVA and Westinghouse did not provide guidelines for such an occasion in their offers.
For those of us watching from the sidelines, it evidence points to the unspoken term that seems to hover over the whole deal: that AECL get the contract. Facing a lack of industry interest in AECL's new ACR-1000 reactor model, Darlington stands as a possible redemption for the company, able to set a precedent for future Canadian and international plants, and protect the 30,000 jobs tied into AECL's business. Without Darlington, the ACR-1000 stands little chance of getting off the ground, and the company would most likely be relegated to the role of global repairman for the 48 operating plants using CANDU technology.
After the most recent malfunction at AECL's Chalk River research reactor in mid-May led to the reactor's shutdown and a shortfall in medical isotopes, a line seemed to have been crossed. Quickly, the lingering option of privatizing AECL switched onto a fast-track toward reality. Now Harper is splitting the company's commercial and research arms, seeking a minority or majority partner for the commercial CANDU business, and casting its net for private companies to take over Canada's medical isotope business.
Uncertainty about AECL's future, particularly how private ownership would effect a cost overrun framework, contributes equally to Ontario's decision to suspend Darlington. However, Premier Dalton McGuinty still seems hopeful to negotiate a price that will allow the project to go forward. "There is going to be a continuing dialogue with the feds," McGuinty said. "We want to know whether they are going to backstop AECL, that they believe it has a promising future for all Canadians. If they do, then we want to be part of that. The way we see it right now is, the ball is in their court."
Our guess is that McGuinty is still banking on the appeal of Darlington as a buoy for the sinking AECL, and is holding off the project in hope of a better deal once the company reorganizes.
Discussion of alternative plans to meet Ontario's growing power demand has been sparse.
