Over the holiday season there’s been a very interesting development in the construction of the OL3 nuclear reactor in Olkiluoto, Finland. Late last year we told you that the rocketing costs and massive schedule overruns (the project is 50 per cent over budget and three years late) had dented the profits of OL3’s builders, Areva.
With OL3 being a ‘turnkey’ project, the reactor’s buyer – Finnish utility TVO - pays a fixed price and Areva pick up the cost of any delays and budget increases. At least in theory. Unfortunately, in the light of falling profits and out of control costs at Olkiluoto, Areva have decided that they are no longer happy with this agreement:
Franco-German consortium Areva-Siemens is to take TVO to arbitration in a dispute over delays and cost overruns at the Olkiluoto 3 reactor, the Finnish nuclear plant operator said on Wednesday.
So much for Areva’s gleaming, flagship, state of the art, EPR and good relations with customers. TVO aren’t going to back down:
TVO has said it will not share in the losses accrued from the cost overrun.
If the arbitration goes ahead, whatever its outcome, it has the potential to have a huge impact on future nuclear build. If the arbitration process finds in the favour of TVO it may force Areva to abandon ‘turnkey’ projects all together meaning governments will be liable for Areva’s incompetence. If the arbitration finds in the favour of Areva it sends another signal that the taxpayer are ultimately liable for the incompetence and delays of private sector nuclear reactor builders. We can expect precedents to be set in this case that will affect how EPR contracts are drawn up all over the world.
Both outcomes appear to be bad news for the taxpayer. In either event they will be forced to open their wallets once more while the likes of Areva, notoriously now unable to stick to a budget or a schedule or an agreement, help themselves to more and more cash.