Britain remains key to Areva's strategy, says UK CEO
06 March 2015
The UK is one of the two key markets for Areva, together with China, as it is "where the group sees growth", the French engineering company's UK chief executive officer Robert Davies told World Nuclear News in an interview yesterday.
Davies spoke to WNN following Areva's announcement on 4 March that it will refocus on its core business of nuclear power and launch a far-reaching competitiveness plan. The group, which is 87% owned by the state, said it aims to make savings of about €1 billion ($1.1 billion) over the next few years after a record loss in 2014 of €4.83 billion ($5.38 billion).
"Our ambitions and objectives in the UK remain unchanged," Davies said.
In new build projects, Areva is partnering with EDF Energy to build the first two UK European Pressurized Reactors (EPRs) at Hinkley Point C with the option of two more at Sizewell C.
In back-end activities, Davies said Areva is "determined to remain a key partner" for the Nuclear Decommissioning Authority (NDA) "for years to come" and is committed to supporting the authority in reaching its objectives, notably at Sellafield.
"It is a marriage between French technologies and UK engineering and resources."
Robert Davies
CEO of Areva UK
"There are clear similarities between sites and activities in France and in the UK regarding decommissioning and waste management, so there is a clear logic for the NDA and Areva to work together to deliver solutions to clean up UK sites," Davies said. "Areva has over 30 years of experience in the country and through our UK-based subsidiary Risk Management Consulting as well as our key partnerships with leading UK nuclear companies. Thanks to this experience, Areva has acquired an excellent knowledge of the UK market and of the regulatory procedures, making it a key partner for the UK. In simple terms, it is a marriage between French technologies and UK engineering and resources."
In December, Areva - as part of the a.m.a consortium with its UK partners Mace and Atkins - was awarded the Silos Direct-encapsulation Plant (SDP) project at Sellafield. Areva is gearing up to work on other projects, Davies said, and is "building a dedicated UK-based engineering organisation to support competitive and on-time delivery". The SDP is a bespoke, mechanical handling and encapsulation plant for nuclear intermediate level waste. The project is an integral part of the waste retrieval and hazard reduction program for the Magnox Swarf Storage Silo at Sellafield, which is of strategic importance to the NDA.
Another key area where Areva is looking to support Sellafield is the "implementation of a solution" to address the UK's plutonium stockpile stored on site. Areva's solution is based on its proven mixed-oxide (MOX) technology which has been successfully operating in France for 20 years, Davies said. Areva's Melox plant has produced more than 140 tonnes of MOX fuel "year on year", he added. Situated in the regional department of Gard, in France the Melox plant produces MOX fuel assemblies intended to power light-water reactors in different countries. Areva's solution aims to transform the UK's legacy stockpile into low-carbon electricity through the manufacture of MOX fuel at a new facility to be used for the UK’s new generation reactors, he said.
In reactor services, Areva has been managing outages at the Sizewell B nuclear power plant since 2008 and is contracted to supply fuel reloads up to 2019. "We are currently in talks with EDF Energy to continue to support Sizewell operations in the years to come, and our teams are mobilized to support this objective," Davies said.
Looking ahead
Davies would not be drawn on a timeline for Hinkley Point C, saying it is for EDF Energy and the UK government to provide details on progress with the project and when they expect a final investment decision to be taken.
Vincent de Rivaz, EDF Energy chief executive, told Bloomberg yesterday that the proposed 10% financial stake for Areva in Hinkley Point C "is not existential" for the project.
"As far as Areva is concerned, the target remains to finalize our contract by the end of March," he said. "Following the contracts signed in 2013 with EDF, the manufacturing of forgings has already started. About 40 forgings have already been produced and more will be produced in 2015."
A key selling point for the UK is the government's electricity market reform, which includes new nuclear power in a contract-for-difference (CfD) mechanism, along with other low-carbon technologies. The government offered EDF Energy an investment contract for Hinkley Point C with a strike price for its electricity output of £92.50 ($151.77) per MWh if the French utility does not also build the Sizewell C nuclear power plant and £89.50 ($146.84) per MWh if it does.
"Areva is committed to remaining a part of Sellafield's future and a key partner for the NDA."
Robert Davies
CEO of Areva UK
Davies said: "Many countries, both within and outside the European Union, are very interested in the market mechanisms that have been created for encouraging low-carbon technologies, notably new nuclear in the UK. Together the mechanisms have created a market that continues to attract developers and investors."
The UK government is changing the way the nuclear site at Sellafield is managed, following recommendations from the NDA. The decision means that private consortium Nuclear Management Partners (NMP) will lose its GBP9 billion ($13.6 billion) contract as the site's Parent Body Organisation. Areva is a minority partner in NMP, a joint venture with Amec Foster Wheeler and URS that has managed the site since 2008.
Regarding the new management model the NDA wants to put in place at Sellafield, Davies said that, alongside its fellow consortium members, Areva "remains engaged to work with the NDA to ensure the best possible transition, and the operational excellence of our work remains the priority".
Areva is "very familiar with the Sellafield site and the challenges it faces, notably through our own experience as there are clear similarities between what Areva has already done in France and what needs to be implemented at Sellafield. Areva is therefore committed to remaining a part of Sellafield's future and a key partner for the NDA."
With 11 offices already across the UK, the engineering organization that Areva is building will continue to increase its local presence, Davies said. This presence will continue to grow through its partnerships with leading UK nuclear companies and organisations, including Atkins, Mace and the National Nuclear Laboratory, among others. This also includes the integration of UK companies into its global supply chain to work on its projects not only in the UK, but also overseas, he added.
"More than 20 UK companies are already part of our nuclear supply chain and nearly 40 have already been pre-qualified and 25 memoranda of understanding have been signed covering a wide range of products and services, including forgings, valves, pumps, cranes, electronics, piping, tanking and refrigeration units for the new EPR reactors planned in the UK. Similar efforts have been made with UK suppliers capable of supporting our back-end projects and more initiatives will be made later this year," he said.
Challenges
Having issued its fifth profit warning in seven months in February and amid rumours of a state-backed rescue package for the company, Davies said Areva's transformation plan was being prepared in close cooperation with the French government.
"However, Areva must now count first and foremost on its own strengths to leave the crisis behind and follow its road to recovery," he said, noting French economy minister Emmanuel Macron's recent statement that the government "will act responsibly vis-à-vis Areva, but a capital increase is not the priority today".
On rumours that EDF plans to take a stake in Areva, Davies said teams from the two companies "have been tasked with determining areas of operational efficiency". He added: "The objective is to optimize the operations between the French nuclear teams by exploring areas of cooperation, where logical."
Asked whether cost and schedule overruns at Areva's project in Finland, at Olkiluoto 3 - including impairment charges - have damaged its reputation in the nuclear power market and its ability to win new business, Davies said: "Areva recognizes that Olkiluoto 3 has been a difficult project, but it is important to recognize that the EPR technology has never been called into question by TVO [Finnish utility Teollisuuden Voima Oyj] or the regulator STUK and that it is a first-of-a-kind reactor. For the first time in many years, progress has been made in the management of the project. Following several joint project reviews, our customer, TVO, considers that the schedule presented by Areva in August 2014 is 'credible and feasible'," he said.
Regarding its US, Russian and South Korean rivals for international contracts, Davies said Areva is "rolling out a competitiveness plan" that aims for annual baseline cost savings of €1 billion by 2017 in relation to 2014. The success of that plan "hinges on organisational simplification and a better quality of operations", he said. "This plan will require unprecedented efforts to adjust the group to the reality of its markets. It relies in particular on new drivers in purchasing and on greatly improved productivity and quality, by streamlining organisations and optimizing the geographic footprint."
"These savings, which may be revised as the situation evolves, will be supplemented by a plan for capturing new opportunities sales. New measures have been decided for the management of large projects, namely Olkiluoto 3, Flamanville 3 and the Jules Horowitz Reactor construction project at the French Atomic Energy Commission's site at Cadarache. In addition, the group will make changes in its engineering organisation to move it towards today's best engineering, procurement and construction practices," he said.
Researched and written
by World Nuclear News