Categories: Commentary

France begins its costly nuclear bailout

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12 June 2015 12:40 PM

Last week, the French government announced plans to inject cash into Areva, the firm that constructs nuclear plants in the country. It is a desperate attempt to ward off the inevitable: bankruptcy.

The French nuclear power sector has always been a top priority for government officials ever since the practically forgotten (and failed) Messmer Plan of the early 1970s. With few orders for nuclear reactors on the books and tremendous cost overruns for the EPR plant under construction in Flamanville, Areva now faces a financially dismal future.

As a result, the French government is officially (press release in French) looking into “reorganizing the French nuclear industry” with a strategic partnership between Areva and EDF, the former state power monopolist. The deal would not make the order books look better by ramping up international demand.

Instead, it would absorb losses by spreading them across the merged new company – and eventually transferring them (at least in part) into tax budgets. The deal would at least settle a dispute over whether EDF or Areva should cover cost overruns for the ERP reactor under construction in Flamanville.

A report by the AFP put some numbers on the entire situation. EDF has reportedly offered to pay more than 2 billion euros to become a main shareholder of Areva. A broker quoted in the article says the merged company may eventually need 7 billion.

Raffaele Piria, energy policy expert at Adelphi and co-author of the World Nuclear Industry Status Report 2014, estimates that the bailout may eventually add up to far more than 10 billion euros. The reactor vessel at the Flamanville site is also currently under investigation and may need redoing completely – at a cost of hundreds of millions of euros. These cost overruns, he explains, are currently unclear but not included in the current estimates in the press.

“The question is how long such subsidies will remain politically acceptable to the French public,” Piria says, not to mention compatible with EU state aid rules. The French policy of supporting national champions may leave the country with few options, however.

Only recently, former French President Nicholas Sarkozy denied claimsby the former head of Areva that France intended to sell a nuclear reactor to Libya’s dictator Moammar Gadhafi. And only a few weeks ago, Finland canceled a potential second order for Areva’s EPR reactor, with the first order facing considerable cost overruns and delays.

A recent article at The Ecologist provides a good overview of the demise of the European Pressurized Reactor, on which the fate of Areva heavily relies. Increasingly, the fate of the French economy depends on it as well.

Source: Renewables International. Reproduced with permission.