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Areva in turmoil, bullet dodged? March 5, 2015

Posted by Maury Markowitz in nuclear.
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Image of a French nuclear reactor

Funny, it doesn’t look like a boat.

The newswires were alight this morning with the latest tale of woe from the nuclear industry; Areva, what’s left of the mergers of various French and other European nuclear firms, announced losses that were greater than the company’s book value.

The company is exploring “voluntary departures” while the government is arranging a bailout to save some of the industry’s 220,000 employees from what appears to be an impending financial implosion.

Which makes the recent sell-off of Canada’s version of Areva, AECL, seem prescient. After eating about $50 billion of taxpayer’s money for 50 years with no upside in sight, the company was sold off for negative $750 million and promptly disappeared into a partnership with the Chinese that has so far yielded zero dollars in actual work.

Looks like we dodged a neutron!

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1. Omnivore - March 30, 2015

I believe their constant failures during the Finnish reactor construction project has contributed a lot to this situation. The reactor was supposed to be finished and operational 6 years ago but the new estimated completion date has once again been moved, towards the end of 2016. Its original price was at around 3 billion USD but the total estimate is currently around 9.2 billion USD which is some 6.5 billion more than what was actually paid for it by the Finnish buyers.

It has been speculated that Areva completely underestimated the close scrutiny Finnish officials would subject the safety features to. There have been some astonishing structural defects found throughout the years it has been under constructions. There have also been numerous cases where Bulgarian mafia has been connected to the construction project; protection money, distortion and whatnot.

Summa summarum, it’s not a surprise Areva’s going downhill.

Maury Markowitz - March 30, 2015

I couldn’t agree more – although the Bulgarian connection is a new one to me! In fairness, a lot of the raw materials that go into the plant underwent massive price increases during the period of construction – concrete went up *five times*. But that’s just the point; big projects take time and increase the chance that something will happen during construction. This is why the bankers love the 18 month end-to-end of a wind turbine.

Omnivore - March 31, 2015

While the price fluctuations of steel and concrete certainly contributed to the rising costs of the power plant, the most significant single factor was to my knowledge that they had totally miscalculated the amount of concrete required to complete the project. The effects of price fluctuations can be mitigated with well thought out supply contracts to a certain extent, but if the calculations regarding the amount required are totally skewed from the beginning — well, that’s it.

Another thing I recall was when they had some serious problems with the automation systems. They had to redesign them and (I think in connection to the new revision of the automation system) they also had to reinstall tens of kilometers of power lines within the complex.

In short, the whole project has been a complete farce from the beginning.


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