Olkiluoto 3 EPR parties agree settlement

Finnish utility Teollisuuden Voima Oyj has agreed a settlement with French Areva and German Siemens in the long-running dispute over cost overruns and delays to the Olkiluoto 3 EPR project. TVO said yesterday that Areva-Siemens will pay compensation of EUR450 million (USD553.73 million).

Finnish utility Teollisuuden Voima Oyj (TVO) has agreed a settlement with French Areva and German Siemens in the long-running dispute over cost overruns and delays to the Olkiluoto 3 (OL3) EPR project. TVO said yesterday that Areva-Siemens will pay compensation of EUR450 million (USD553.73 million).

Olkiluoto 3, pictured in September 2016 (Image: TVO)

The consortium of Areva GmbH, Areva NP SAS and Siemens AG began construction of Olkiluoto 3 in 2005 under a turnkey contract signed with TVO in late 2003. Completion of the 1600 MWe reactor in southwest Finland was originally scheduled for 2009, but the project has suffered various delays and setbacks. The settlement agreement brings to an end claims and counter-claims of billions of euros over the plant, the start-up of which was postponed again last year to May 2019.

"TVO welcomes the agreement which ensures that the OL3 EPR project continues to have the necessary financial, technical and human resources for the completion and successful start-up of the plant and also settles other outstanding issues," said Jarmo Tanhua, TVO president and CEO.

When TVO signed the turnkey contract, the cost of the new unit was set at EUR3.2 billion, but the company now estimates its total investment to be around EUR5.5 billion, he added.

Conditions

The entry into force of the settlement agreement is subject to certain conditions that are expected to be met this month, TVO said. It is not definite, therefore, that the settlement agreement will take effect, it added.

According to the agreement, Areva will source the necessary additional resources from Framatome, the majority owner of which is EDF, to provide and maintain "adequate and competent technical and human resources" for the completion of the project, TVO said. The supplier consortium companies also undertake that the funds dedicated to the completion of the project will be adequate and cover all applicable guarantee periods, including setting up a trust mechanism funded by Areva companies to secure the financing of the costs of completion, it said.

The agreed financial compensation settles an International Chamber of Commerce (ICC) arbitration decision concerning the costs and losses caused by the delay of the project and is to be paid to TVO in two instalments. The parties therefore have agreed to withdraw all on-going legal actions related to the project, including the ICC arbitration.

The supplier consortium companies are entitled to receive an "incentive payment" of up to EUR150 million, TVO said, "upon timely completion" of the project.

"In the event that the supplier consortium companies fail to complete the OL3 EPR project by the end of 2019, they will pay a penalty to TVO for such delay in an amount which will depend on the actual time of completion of the OL3 EPR project and may not exceed EUR400 million," TVO said. It expects to receive the first payment of EUR328 million this month, once the settlement agreement takes effect. The second payment of EUR122 million is payable upon completion of the OL3 EPR project or, in any event, on 31 December 2019 at the latest.

The turnkey principle of the plant contract and liability of the supplier consortium companies "remain in full force", it added.

The latest schedule sees grid connection taking place in December, with the start of regular electricity production in May next year. The unit's ramp-up program will see it produce 2-4 TWh of electricity, at varying power levels between those dates.

Researched and written
by World Nuclear News