Olkiluoto 3 losses to reach €1.7 billion

26 February 2009

A financial presentation by France's national nuclear company Areva has put forward the estimate, which does not include potential sums from arbitration over the troubled construction of Olkiluoto 3.


How Olkiluoto should look in 2012
Areva's FY2008 results presentation included the figure of €1.7 billion ($2.1 billion) as an estimated loss based on provisions already made and completion in 2012 - three years late. It includes €749 million allocated in the last year, and €292 million the year  before. The contract for an Areva-Siemens consortium to construct the reactor was worth €3 billion when signed at the end of 2003.


The 1600 MWe EPR reactor at Teollisuuden Voima Oyj's (TVO's) Olkiluoto site which was meant to begin operation this year is now expected to start in 2012. But this date, Areva warned, still depends on certain actions by TVO, which "has not satisfactorily implemented the 48 measures" that the two parties agreed and announced last year.


The war of words between the project parties continued, but did not get worse. Areva complained that TVO takes an average of one year to process technical documents, whereas this was meant to be done in just two months. For its part, TVO "totally rejects the consortium's accusations that TVO has any responsibility for the delay."


Arbitration in the International Chamber of Commerce is underway. Proceedings are secret, but it is known that the Areva-Siemens consortium would like a schedule extension and €1 billion ($1.2 billion) in compensation and late payments, while TVO has said in letters that it considers itself entitled to a whopping €2.4 billion ($3.0 billion) in damages.


The other big money issue in Areva's announcement concerned the departure of Siemens from the Areva NP reactor technology joint venture. By the end of January 2012 Areva must purchase Siemens' 34% stake, which it has valued at €2.05 billion ($2.61 billion) ahead of final negotiations. This sum was added to Areva's net debt which then jumped to €5.5 billion ($7.0 billion), although this is balanced by equity of €7.3 billion ($9.3 billion).


While the buyout of Siemens' from Areva NP will be expensive, it will also simplify the subsidiary's structure and "bolster" an overall program of reducing purchasing and overhead costs worth €600 million.


Apart from these issues, Areva's business performed strongly, with its order book growing to €48.2 billion ($61.4 billion), up 21% on last year. Company CEO Anne Lauvergeon said the group's performance in the current economic situation demonstrates "the robustness of the Areva business model." In the last year, Areva has hired almost 10,000 new staff.