French nuclear giant AREVA were force to issue a profit warning yesterday. It has had to find an extra 400 million euros to cover the additional costs of building its so-called flagship European Pressurised Reactor at Olkiluoto in Finland. This is on top of 2.3 billion euro provisions put aside in previous years and brings the current estimated overrun to an eye-watering 2.7 billion euros. The initial cost of the project was 3.2 billion euros.
While the rocketing costs of the OL3 EPR have dragged down AREVA's results for years, this is the first time that they have sent the company into the red. The company’s financial health has already been suffering thanks to the Olkiluoto project, as it struggles to build up its reserves for planned future investments.
But that’s not the end of it. This announcement of another enormous cost overrun will not be the last.
This newly announced 400 million is based on the assumption that OL3 will be operational by end of 2012 and not the middle of 2012. However, it became clear last week that the end of 2012 milestone will - at best - be completion date for construction. It will then take at least another six months before the newly finished power plant can go into commercial operation. That would mean roughly another extra 400 million euros being added to the project’s budget.
Also, in the case of Olkiluoto 3, the start-up time may be significantly longer as it is a first-of-a-kind project. For example at the Temelin nuclear power plant in the Czech Republic, it took over a year before finished reactors were able to commercially operate at full output (and since then, their average electricity production has been 63% of maximum, well below the global average of 78%).
We can also expect additional delays in the reactor’s construction as it is only just halfway to completion. The most challenging phases of construction are still underway or to come, including the installation of heavy components, the design and installation of computer systems, and the final testing and licensing. A completion date of the end of 2012 is looking extremely optimistic.
We’ve seen it all before. Major complications multiplied during the completion of the Temelin reactors in the early 2000s. They were the last pressurized water reactors (PWR) built in Europe and – like AREVA’s EPR PWR - partly first of a kind too. Connecting major components, setting up cable connections (thousands of kilometers of cables were involved), debugging of digital control systems, and tuning up the reactor turbines all proved enormously difficult and time consuming. (Right now, as the largest nuclear reactor in the world, the EPR in Finland is to set a new record and have even larger turbines. Similar complications to Temelin are more than possible). In the end it took 18 months to connect the Temelin-1 reactor to the grid and start full commercial operation.
So, it’s all a huge ugly, costly mess. Who bears the burden of AREVA’s incompetence? As the company is almost completely state-owned AREVA’s losses are ultimately borne by French taxpayers. The public will have to open their wallets yet again to bail out another nuclear boondoggle.