Risks of new build tip EdF's balance

30 July 2010

Electricité de France's (EdF's) finances have been hit by a provision for the risks of new nuclear build in America, delays at Flamanville and operational issues.


First-half results released today by the world's biggest power utility showed a sharp drop in net income from €3.1 billion ($4.0 billion) in the same period last year to €1.6 billion ($2.0 billion) in 2010. The primary cause of this was the provision of €1.06 billion ($1.38 billion) to cover the risks of the Unistar joint venture with US utility Constellation.


Unistar originally wanted to build several Areva EPR units across North America, but EdF said today only one project was "currently in development". The €1.06 billion provision "covers the risks of impairment of the assets of [Constellation], the investment in Unistar and certain future costs and risks associated with the project, as EdF still intends to continue studies for development of a new reactor on the Calvert Cliffs site."


The project is seen as a front-runner for the US Department of Energy's current batch of loan guarantees but it nevertheless faces competition from NRG's South Texas Project expansion. Officials have not been quick in awarding loan guarantees and remarks from both EdF and Constellation executives show the companies are bearing the strain of those delays.


Flamanville 3, June 2010 (EdF)
Flamanville 3's reactor, turbine and office buildings last month
Image: EdF)

Closer to home, EdF has acknowledged the delay in construction of an EPR at Flamanville. At the outset, the project was meant to supply power in 2012 at a cost of €4 billion ($5.2 billion). That has been revised to 2014 and €5 billion ($6.5 billion).


And existing reactors too have been problematic. Chairman and CEO Henri Proglio noted recent dips in power production and said the company was "working on the necessary reorganization in order to reverse the trend in French nuclear fleet's performance."


Two of EdF's reactors have had operational issues. The 910 MWe Bugey 3 reactor has been shut down since April 2009 when significant corrosion was found in a steam generator. EdF decided to bring forward the replacement of those components to July from an original date in September this year. Meanwhile, 1188 MWe Sizewell B in the UK has a pressurizer issue which will see it offline until the third quarter of the year - a quarter later than last announced.


There was some good news for EdF in its results: It has found a buyer for its UK distribution business. An "irrevocable offer" has been made by the Hong Kong-based Cheung Kong group totalling some €6.9 billion ($8.9 billion).


EdF said this figure represents 27% more than the business's regulated asset value and over eight times its annual pre-tax earnings. The huge network supplies 8 million homes and businesses in the London area as well as three airports, London Underground and the Channel Tunnel.
Researched and written
by World Nuclear News