Areva NP chief highlights restructuring progress

15 September 2017

Corporate restructuring of the French nuclear sector is "on track and major milestones have been successfully achieved", Bernard Fontana, CEO of French engineering company Areva NP, said yesterday. These milestones include re-focusing Areva NP on its core business since July 2016 and the ongoing transfer of the company's assets to a "financially sound and cash-generating" subsidiary, namely New NP.

Fontana-Isted - WNA Symposium 2017 - 460
Fontana being interviewed by WNN Editor Claire-Louise Isted (Image: World Nuclear Association)

The European Commission approved the restructuring of the Areva group in mid-January, ruling that the French government's plan to grant a capital injection of €4.5 billion ($5.0 billion) into Areva does not breach European Union state aid rules. It ruled that payment of the aid was subject to certain conditions, including authorisation of the sale of Areva's reactor business to EDF under EU merger rules. The authorisation of that transaction meant that this condition had been met.

The Commission included a second pre-condition for the increase of capital: obtaining "favourable conclusions" from the French nuclear regulator, the Autorité de Sûreté Nucléaire (ASN), on the carbon segregation of the Areva-supplied reactor pressure vessel at Flamanville unit 3. ASN then provisionally ruled that the unit can start up safely next year, but that the head of its reactor pressure vessel (RPV) will need to be replaced by the end of 2024.

French utility EDF agreed in July 2015 to take a stake of between 51% and 75% in Areva's reactor unit in a government-backed plan to revitalise France's nuclear power industry. The reactor operations to be sold have been transferred to a subsidiary wholly owned by Areva NP, referred to as 'New NP'. Contracts for the Olkiluoto 3 EPR project in Finland and for resources required to complete that project, and some contracts relating to components forged in the Le Creusot plant, are not included in the sale. Those contracts will remain within Areva NP. In May this year, the Commission approved EDF's takeover of Areva's nuclear reactor business under EU merger regulations.

In July, Mistubishi Heavy Industries (MHI) and Assystem signed binding agreements with EDF to take equity stakes in New NP. Subject to approval by its board, MHI will take a stake of 15% - and potentially up to 19.5% - in New NP, while Assystem will take a 5% stake.

In an interview during the World Nuclear Association's Symposium in London yesterday, Fontana said New NP will be "a company with almost no debt" and its creation will be completed by the end of this year.

Finnish utility Teollisuuden Voima Oyj (TVO) announced yesterday it had filed an appeal against the European Commission's approval for the French government’s capital injection into Areva. TVO claims the plan does not provide sufficient guarantees that the Olkiluoto 3 EPR project will be completed. Fontana said, however, that the Commission's approval in January had been made on the understanding there would be no changes to the Olkiluoto 3 project.


The World Nuclear Association has set the target of 1000 GWe of new capacity by 2050. France has the world's biggest installed capacity of nuclear power, but the government has plans to reduce its share of the country's electricity mix. Asked about Harmony, Fontana said: "I'm convinced that nuclear power has an important role to play and I think the Harmony target is very positive."

He added: "There is growing demand for reliable, affordable and clean electricity. We will need all low-carbon energy sources to work together as part of a diverse mix and nuclear energy has a strong part to play as a predictable low-carbon source of baseload electricity. The Harmony target is a good way to federate the nuclear industry."

But it is important to acknowledge, he said, that nuclear "faces a challenging market environment and its competitiveness, whilst maintaining a high level of safety, is key for its sustainability".

Asked about Harmony's objective for harmonised regulatory processes - in view of EDF and Areva's experience with regulatory authorities with its EPR projects in China, Finland, France and the UK - Fontana said: "The Harmony goals identify the roadblocks to overcome. From my perspective at Areva NP, we need convergence of the licensing process."

He added: "Predictability of new-build construction needs to be improved to reduce significantly project risks and related investments. This requires: a clear, predictable and stable regulatory/licensing system; freezing the design at an early stage; the quality of execution; and standardisation of designs to benefit from economies of scale and reduce licensing risk."

Harmonised regulatory processes "don't exist currently, even though convergence would be useful and desirable", he said. "But other industrial parameters are in our hands, which could allow us to de-risk projects."

He added: "To switch from prototypes to the industrial phase we need to reduce the risks and increase the preventative technical solutions. For this we need a predictable and stable licensing system and standardisation of designs to improve the economies of scale to reduce the licensing risk. We need to also try and standardise the additional non-site specific or non-regulatory requirements for the licensing."

Asked about the anomaly in the steel of Flamanville 3 within the context of another Harmony objective - an effective safety paradigm - Fontana said the issue should be "put in perspective". He stressed the "paradox" that the debate had centred on the safety of an RPV for a Gen III+ reactor, "the safety of which is better that for Gen II reactors".

"Areva NP produced the reactor pressure vessel head and bottom head in 2005 and 2006 in accordance with the regulatory requirements in force at the time. The nuclear pressure equipment Order was published in 2006, but convergence concerning demonstrations to be provided and documents to be produced were only reached in 2011," Fontana said.

Following Areva NP's detection at the end of 2014 of anomalies in the composition of the steel of the two RPV components, it worked with EDF to prepare and deploy a large-scale additional test program that was validated by the ASN, he added. This included the use of three "sacrificial domes" and more than 1700 samples were taken.

"On 28 June, the ASN concluded in its draft opinion that the mechanical properties of the two parts are adequate, including in extreme situations, and that they are thus serviceable," he said.

"This issue shows the complexity of integrating a regulatory change when the reactor is being manufactured and is under construction, and the impact has been underestimated by all stakeholders. Nevertheless, it has been addressed in an open manner with the French nuclear safety authority and the justification report is publicly available. Public confidence in nuclear is stable in France," he said.

Asked whether the RPV cover would be replaced by the end of 2024, Fontana said, "We’ll see, but we need to anticipate the change. The RPV is fit for service and the final ASN opinion is to be submitted in October."

He added: "No option has been closed at this stage, including the feasibility of an in-service inspection. Areva is preparing for the event the RPV head will have to be replaced by 2024, but production cannot start before the documentation has been prepared. This is related to the forging only, launched by Japan Steel Works, but the manufacturing will be done in St Marcel. At the same time, we are also developing at Le Creusot new fabrication processes to demonstrate Areva Creusot Forge's capability to produce parts without segregation. Our goal is to be able to produce in Le Creusot all the forgings for large nuclear components."

Asked about the "future price" of an EPR, Fontana said, "Changing a design is expensive and so I can't put a figure on it … I really believe we put competitive offers on the table." He added: "We entirely agree there needs to be a levelised price for nuclear power plants of the future."


The EPR projects are making good progress, he said. Flamanville 3 has started cold function tests, while Olkiluoto 3 and Taishan 1 are at the hot function testing stage, he added.

Flamanville 3 is scheduled to be connected to the grid in May 2019 and reach full power in November 2019. The dates are in line with the timetable EDF gave in September 2015.

Olkiluoto 3 has been under construction since 2005 and has seen several revisions to its start-up date, which is now expected by the end of 2018. Taishan 1 in China, which has been under construction since 2009, is expected to start up in the second half of this year, while Taishan 2 is scheduled to begin operating in the first half of 2018. Two further EPRs are planned at Hinkley Point in the UK.

Asked about investment in new build projects, Fontana referred to the risks "inherent to" a first-of-a-kind project and the "reliance on commodity prices for power that make it unattractive for private investors".

He added: "To improve the investment rate, it is essential to de-risk new build and reflect in the value of electricity and capacity the real value of the public benefits provided by nuclear power. To stabilise long-term revenues, there needs to be the assurance of a long-term electricity price."

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by World Nuclear News