France begins its costly nuclear bailout

Renewables International

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.

“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.