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EDF Sees 1 Billion-Euro Cost Cuts, Keeps French Reactor Plan

Jan. 18 (Bloomberg) -- Electricite de France SA, the world’s biggest nuclear-plant operator, will cut 1 billion euros ($1.3 billion) of costs while sticking to a plan to turn on a new reactor in Normandy in 2016.

“All parts” of the utility will contribute to cost reductions, Herve Machenaud, head of production and engineering, said yesterday at a press briefing in Flamanville, where the planned reactor has been plagued by delays and budget overruns. “EDF is confronted with financial constraints,” he said.

The expense of building the so-called EPR plant has swelled following revisions to its engineering and design, as well as changes made in the wake of Japan’s Fukushima nuclear disaster. The utility, which will detail the planned cost savings next month, also blamed the cuts on a law forcing it to sell atomic output to competitors in France, where it’s still dominant.

“Because we are obliged to sell electricity for less than we can produce it, we have to lower costs,” Machenaud said. “Jobs and recruitment won’t be affected.”

EDF is planning to hire 6,000 people in France this year, two-thirds to replace workers who are leaving the company. The 1 billion euros of cuts come on top of a 2.5 billion-euro cost-saving plan for 2010 through 2015 that the utility said was about 40 percent complete in July.

Rigorous Program

“A more rigorous program would be very helpful to EDF,” Sofia Savvantidou, an analyst at Citigroup Inc. in London, wrote today in a note.

State-owned EDF, which began building the 1,650-megawatt reactor at Flamanville in December 2007 for an initial estimate of 3.3 billion euros, has revised cost projections every year since 2010. In July 2011, the utility added 1 billion euros to bring the figure to about 6 billion euros. Last month it raised the estimated cost of development to 8.5 billion euros.

The chances that EDF will have to further revise the cost estimate or the building schedule are “infinitesimally small,” Machenaud said yesterday.

A successful startup of the EPR in 2016, delayed from 2012, could be crucial to furthering France’s nuclear expansion abroad as the plant showcases the most recent reactor technology. Setbacks in construction and safety regulations have raised concerns that EDF could struggle to build similar EPRs in Britain as proposed. It’s also developing two in China at Taishan with partner China Guangdong Nuclear Power Group Co.

Chinese Partnership

The relationship between the French utility and CGNPC could deepen, Machenaud said. EDF has an agreement with the Chinese company on a “basic design” for a 1,000-megawatt reactor and plans to add more details to the project, which could produce the “safest and cheapest” model on the market, he said.

Separately, CGNPC is also interested in joining EDF to develop new reactors in the U.K., according to Machenaud. He declined to comment on whether EDF’s current partner in Britain, Centrica Plc, plans to pull out of their projects.

The Chinese EPRs will cost less than the one in Normandy, Machenaud said, without giving a figure. Even building a second EPR at Flamanville could be done for 25 percent less and would take 18 months to two years less time, he said.

The domed roof of the reactor building at the most-advanced EPR at Taishan is in place, marking a “significant step” that hasn’t been reached at Flamanville, according to Machenaud. He said producing electricity from that unit in 2014, the “official” target date, would still be “extremely ambitious.” The second unit is scheduled to start a year later.

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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