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EDF Reactor Extensions May Cost $65 Billion on Safety Review

Jan. 4 (Bloomberg) -- Electricite de France SA said the cost of extending nuclear reactor lives to 60 years could reach 50 billion euros ($65 billion) as safety measures ordered by regulators force the utility to accelerate investment.

The figure is 43 percent more than an estimate of about 35 billion euros Chief Executive Officer Henri Proglio gave in 2010. Paris-based EDF, operator of the country’s 58 nuclear reactors, was ordered by the Autorite de Surete Nucleaire yesterday to spend billions of euros on improvements in a safety review following last year’s Fukushima disaster in Japan.

The improvements “will require an increase in annual capital expenditure,” Jean-Marc Miraucourt, head of nuclear engineering, said in a telephone interview. The utility could end up spending from 40 billion to 50 billion euros extending the lives of reactors, he said.

EDF dropped as much as 4.7 percent in Paris trading, the most since Dec. 13. The stock, down 43 percent in the last 12 months, traded at 18.35 euros as of 11:12 a.m. local time.

“If we assume the safety upgrades to happen over eight years we expect the updated level of capex to be 5 billion euros annually,” Per Lekander, an analyst at UBS AG, wrote in a note today. “From now until 2020 the cumulative free cashflow is negative, raising questions about the value, if any, of French nuclear.”

Safety Measures

EDF is forecasting spending of about 700 million euros at each existing reactor to allow for operations through 60 years, Miraucourt said. The total spending plan could rise to 50 billion euros including safety measures such as new diesel generators as well as equipment like steam generators.

While the budget won’t be “dramatically changed,” spending will be accelerated, he said. “Our timetable will be modified.”

The costs of implementing the safety measures will be “less than” 10 billion euros, Proglio said in an interview published today in Le Monde. That could boost nuclear output costs to between 46 euros and 50 euros a megawatt-hour, he was cited as saying.

“It remains uncertain whether EDF will be allowed to pass through those extra capex into the end-user tariffs,” Credit Agricole CIB Research said in a report.

Revised Estimates

EDF’s cost estimates for extending the lives of its reactors beyond four decades have risen in recent years. The utility said in July annual spending on French reactor maintenance and upgrades could more than double to as much as 3.6 billion euros in 2015, compared with 1.7 billion euros in 2010. This spending plan didn’t include safety measures decided after Fukushima, Miraucourt said yesterday.

EDF’s 30-year-old French reactors are now undergoing inspections by ASN to determine whether they can operate for another decade. Keeping them going would still be cheaper than building new plants, such as the EPR model the utility is developing for about 6 billion euros at Flamanville in Normandy that’s expected to start commercial operations in 2016.

EDF was told by the ASN to install “core” safety equipment and procedures at every plant that can be used to cope with “extreme” situations. These range from additional diesel generators for power supply to “bunkered” control rooms.

Rapid Response

The ASN also called for the creation of a rapid response team with specialized equipment by the end of 2014. It ordered measures to prevent the drying-up of spent fuel pools and feasibility studies on building underground barriers at reactors and storage sites at La Hague to safeguard water tables.

The watchdog reiterated demands that EDF reinforce the concrete base of France’s oldest reactor at Fessenheim by mid-2013 and find an alternative source of coolant by the end of this year.

Work strengthening the base of the Fessenheim reactor has already started and other safety work needed will be carried out, Miraucourt said yesterday. “There is no question the work will be carried out.”

Making the concrete base of the oldest reactor at the site thicker will cost about 15 million euros, he said.

Fessenheim’s Unit 1 reactor was commissioned in 1978, while EDF’s reactor fleet is about 25 years old on average.

To contact the reporter on this story: Tara Patel in Paris at tpatel2@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net

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