"Doctor Areva" tries to cash in on nuclear crisis

July 4, 2011 | 00:00

"Doctor Areva" tries to cash in on nuclear crisis

French nuclear flagship Areva is putting a brave face on "Fukushima". It is positioning itself as a nuclear safety specialist that can help power producers everywhere improve the security of their reactors. It has even announced that it is ready to come to the rescue anywhere in the world when there are problems at nuclear power stations - like a Nuclear Doctor Without Borders. But this opportunistic response to the Fukushima crisis, thought up by CEO Anne Lauvergeon just before she was dismissed from her job by French President Nicolas Sarkozy, cannot hide the considerable long-term challenges the state-controlled French nuclear industry is facing. Yves de Saint Jacob reports from Paris.

Just before she was fired on 16 June, with her legendary flair for public relations, Anne Lauvergeon, chief of Areva, put a new spin on the generally gloomy landscape the nuclear industry is finding itself in. ‘Doctor Areva is ready to intervene where he is needed’, she announced.

Speaking on a France Inter radio programme, “Atomic Anne” pointed out that the French group was already at work in Fukushima, where it set up a plant to treat contaminated water in early June. The plant is able to treat the 100,000 tonnes of water that were made radioactive after the Japanese power station was damaged by the earthquake and tsunami at a rate of 50 m3 per hour.

Thus, making a virtue out of necessity, Lauvergeon envisioned a new strategic route for the French nuclear national champion that might help it to weather the storm the global nuclear industry is facing. She said there were three concrete applications for Areva to pursue in the wake of Fukushima:

  • install systems that avoid concentrations of hydrogen in cases of accidents such as caused by the explosions at Fukushima (Price: €500,000 a piece, according to her estimate)
  • improve the protection of back-up engines that feed the cooling systems, i.e. place them at sufficient height and put them in separate and waterproof buildings
  • improve the systems that control the steam pressure in the power plant

She had another idea as well, namely to set up a ‘rapid reaction force’, that would be ready to intervene in the case of a nuclear disaster – an idea inspired perhaps by the French success story of Médecins Sans Frontières. At Fukushima, there were lots of questions about the speed at which helicopters, fire engines and sea water pumps were put into action. The idea of a ‘rapid intervention force’ was also put forward by the French government on the margins of the G8 summit in Deauville last May, although it did not make its way into the final declaration.

Good business

So how realistic is this strategy? How lucrative could it be for Areva? The nuclear safety upgrading market does seem to be growing again, as was the case after the accidents at Three Mile Island in the US in 1979 and at Chernobyl in the former Soviet Ukraine in 1986. ‘The Fukushima accident will mean investments to upgrade the nuclear safety of power stations and to improve the safety systems which make it possible to deal with external problems’, renowned French energy expert Jean-Marie Chevalier tells European Energy Review. ‘This is good business for Areva, which is best placed to make good use of its expertise in these areas.’

According to Professor Chevalier, this kind of work might make up for the expected long-term losses in the sales and reprocessing of fuels brought about by the German and Swiss nuclear phase-out decisions. ‘With the work linked to extending the lives of reactors and the full dismantling of power stations that have reached the end of the road, this is an activity that will be significant for decades.’

Chevalier notes that ‘since Fukushima, Anne Lauvergeon had succeeded in having Areva make its mark as a global company with competence in this sector and she had thereby taken forward the idea of a “doctor whom you call when you have a problem”. She had developed a good image. The Japanese

'I am very much afraid that the Americans and Japanese are laughing at us and do not understand why we deprive ourselves of talent in this way'
called on Areva for the treatment of water and the President of US group Duke Energy sent a letter to Areva's board to recommend keeping Lauvergeon on. There was definitely international recognition. It is a pity to have her leave at this point. Without in any way questioning the undoubted competence of her successor, I am very much afraid that the Americans and Japanese are laughing at us and do not understand why we deprive ourselves of talent in this way.’

Jacques Foos, a specialist in radioactivity and nuclear science and honorary professor from the Conservatoire National des Arts et Métiers, who was an observer during two "Post-Fukushima" inspections caried out by the French nuclear safety authority (ASN) at Areva’s reprocessing plant at La Hague, also believes that some additional work will come out of the new safety measures attendant upon Fukushima. In an interview with EER, Professor Foos gave the example of strengthening levels of resistance to seismic shocks in risky areas – for example in France from the Alsace to the valley of the Rhône. These could, in his view, lead to the strengthening of the concrete foundations of the power stations. ‘Similarly, work consisting of placing the back-up engines high up will mean construction work, which may amount to interesting prospects for nuclear service providers, especially in the building sector.’ Audits of nuclear power stations have begun in France under the supervision of ASN. ‘We have to check questions as practical as: “what happens if the site is covered by a metre of snow or if there are winds of 200 km/h”. That can lead either to repair work or new installation work’, Foos said.

Stress tests

Dominique Vignon, who was the head of Framatome from 1996 to 2000 (Framatome was the French reactor producer that, by merging with fuel producer Cogema, gave birth to Areva in 2001), agrees that there is ‘a significant market’ for Areva. At the same time, he puts the company’s prospects in context. ‘This is not a new sector strictly speaking. After Three Mile Island, there was considerable “upgrading” work carried out, particularly with regard to control and operating procedures. The same was true after Chernobyl. After Fukushima, there will also be some upgrading to be done, but this won’t necessarily be of great interest for manufacturers of reactors such as Areva. The post-Fukushima work will in particular be about emergency planning, i.e. taking care of the backups one has in extreme situations,

'We have to check questions as practical as what happens if the site is covered by a metre of snow'
such as back-up diesel engines, additional sources of water, and auxiliary systems, all of which were problematic at Fukushima. For France, it will be in particular power producer EDF, engineering companies and building service providers that will be concerned. Outside France there may be some work for manufacturers, but not much more than in the case of other accidents. In other words, there will be money to be made but not so much for reactor producers as for service and engineering companies that install pipes, pumps and electrical systems.’

The amount of upgrading work will depend on the progress of global governance of nuclear safety. ‘Fukushima is going to give a big push towards an international system with more global standards’, Lauvergon said before she left Areva. She stressed the importance, despite its vagueness, of the G8 declaration on nuclear energy in Deauville, France. She hoped that the G20 would move in the same direction.

The European Union and the International Atomic Energy Agency (IAEA) have already started to look at the issues of stress tests and international standards, but it is too early to assess the translation of these in an economic sense. At a meeting of the International Atomic Energy Agency (IAEA) in Vienna from 20 to 24 June, Vladimir Grigoryevich Asmolov, the Deputy Director General of Russian operator Rosenergoatom, stated in an interview with French magazine L'Expansion that Russia had already decided to invest €100 million in upgrading measures and will spend another €500 million in the next four years.

In addition to the upgrading market, as from around 2020 nuclear operators will also have a lot of work dismantling nuclear power stations that have reached the end of their lifetimes. Depending on the country, estimates for decommissioning costs vary considerably: from €300 million in the US to €500 million in France and even €2.9 billion in Great Britain.

Nuclear policy council

Luc Oursel, Areva's new CEO (photo: Marechal Francois/AP)
But the new direction that Areva is branching out into will not be led by “Atomic Anne” anymore. She was fired by President Nicolas Sarkozy in mid-June – rather abruptly although rumours of her increasingly tense relationship with the French executive had abounded for many months. In a country where nuclear power was first used for military purposes – by General de Gaulle – before becoming a major civil development after the oil crisis in the mid-70s, the nuclear industry is fully managed by the French State, which keeps a majority share both in Areva (87%) and the main electricity company EDF (84%).

The nuclear strategy, including the industrial, research and international aspects, is designed by a “nuclear policy council” (Conseil de politique nucléaire), chaired by the President himself, and which include no less than 8 ministers, the head of the Armed Forces and the head of the powerful public body ‘Commissariat à l’énergie atomique’. The Council may hear industrialists before making decisions when it is deemed necessary, but this is not common practice.

The last meeting of the Council was in April and it decided on guidelines for a better cooperation between EDF and Areva. Its desire to put EDF in a prominent position was quite clear. Over the years, as she worked actively to establish Areva as a fully-integrated, internationally highly profiled company in the nuclear field, Anne Lauvergeon had multiplied tensions with EDF, the experienced operator of nuclear sites and a growing international player, and with Alstom, the maker of equipment for power generation and high speed trains. Their managers (Henri Proglio of EDF and Patrick Kron of Alstom), two high-profile industrialists close to Sarkozy, progressively spread the image of Anne Lauvergon as brilliant but too “indidvidualistic” and therefore unable to participate in a coordinated French strategy. Although Lauvergeon, a former advisor to socialist President Mitterrand, had initially established a good relationship with Sarkozy – who
'There will be money to be made but not so much for reactor producers'
even considered appointing her as Economy and Finance minister, the seat just left by Christine Lagarde – her tendency to address the media and public opinion to get support instead of lobbying in the discreet circles of decision-makers and the powerful corps of French engineers, had been known to increasingly irritate the French President. Areva’s difficulties in managing the construction of an EPR reactor in Finland and the spectacular failure to land a big contract in the United Arab Emirates, which was won by Korean industry, were grist to the mill of Lauvergon’s rivals. Her most visible support came from private company GDF Suez, a competitor of EDF in the nuclear field.

Many names of potential successors had been circulating in the previous months, but it was one Lauvergeon’s deputies, Luc Oursel, who got the appointment to the surprise of almost everybody. Oursel is not a well-known personality but his professional competence is beyond doubt. Oursel now has to face a market with many uncertainties after the Fukushima accident. Positioning Areva as a Flying Nuclear Doctor might be the least of his worries. He will have to develop a market for Areva’s new EPR (so-called third-generation) reactor. In addition, he will have to deal with Areva’s mining subsidiary and find a solution for the permanent storage of nuclear waste – at a time when even in France critics of nuclear power are gaining traction.

Forest for the trees

Areva’s stated goal is to sell 45 European Pressurised Reactors by 2020. Before she left, Lauvergeon said that, despite the negative impact of the Fukushima accident, this figure is still realistic, although she did concede that a delay of six to nine months was possible because of various French, European and global safety audits. Oursel has not spoken out on the sales programme yet. At this moment, 4 EPR's have been sold by Areva, one in France, one to Finland, and two to China.

French nuclear experts refuse to be pessimistic about their market prospects. ‘We sometimes can't see the forest for the trees because we are too much impressed by the German, Italian, and Swiss decisions’, says Francis Sorin, spokesperson for SFEN (Société français de l’énergie nucléaire), a think tank that brings together 3,500 scientists, engineers and researchers whose aim is to promote scientific and technical progress in the various nuclear sectors. ‘If we count the number of people in the world, four billion people on the planet will depend on nuclear electricity.’

Professor Chevalier also thinks that it is important to put the announcements from Berlin, Rome and Bern in context. ‘Nuclear orders are not being cancelled on a global scale. We knew that Germany had decided to come out of nuclear energy. Italy had a plan to return to nuclear power, but everyone had doubts about the success of a referendum on this issue. Switzerland has decided to continue with its current power stations to the end. The French are obsessed with the idea that their country is isolated in

'If we count the number of people in the world, four billion people on the planet will depend on nuclear electricity'
Europe. But other European countries are not changing much. The UK is aiming at a pragmatic system based on decarbonised energy, with nuclear plus renewables. Finland will carry on, Sweden may do so, the Netherlands have confirmed that they want a second nuclear power station, and eastern European countries such as Poland and Bulgaria are sticking to their plans. Above all, at a global level, India and China are not giving up nuclear power.’

A more fundamental question mark for Oursel is whether to continue Lauvergeon’s strategy of being a fully integrated player. Thus, Areva is a primary producer of uranium since it bought (at a very high price) the Canadian Uramin company in 2007. It has made considerable investments since then to develop its mining activities. Lauvergeon had agreed with the French government to pass legislation in July to entrust its mining activities to a subsidiary, open to outside investors, without losing public control of this strategic activity. So far the mining business has been lucrative, but the setback caused by Fukushima has made its future more uncertain. This goes for the entire nuclear sector. Oursel will have his work cut out for him.

Related articles on European Energy Review

 

Fukushima: An earthquake for the French Nuclear Sector 
For GDF Suez, the key word is diversification

A World to conquer for French nuclear technology 
Nuclear waste: the intractable problem
Interview Jacques Saulnier, Areva: ‘Our model is unique’
Interview Pierre Gadonneix, ceo EDF: ‘I am convinced we have what it takes’

Interview Dominique Vignon: ‘Politics interfered’

 

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