March 7 (Bloomberg) -- Europe’s nuclear industry must fight to regain the trust of investors after delays and cost overruns at projects in Finland and France dealt a blow to its reputation, said Westinghouse Electric Co.’s European chief.
“Banks, investors, the whole financial community finds it difficult to trust the credibility of nuclear projects,” Yves Brachet, the chief executive officer for Europe, Middle East and Africa, said yesterday in an interview at Bloomberg’s Prague office. “The entire industry is suffering from the Olkiluoto effect,” he said, referring to construction problems at the world’s biggest nuclear reactor in Finland, which is about seven years behind original schedule.
Low power prices, the collapse of European Union carbon emission trading and the continent’s economic crisis sapped investor enthusiasm for nuclear projects, which take years to build and cost billions of euros. The industry was further harmed after the 2011 reactor meltdown at Japan’s Fukushima plant, which prompted Germany to plan an exit from nuclear power by 2022.
Countries like Switzerland and Italy declared a nuclear-free future while investors abandoned projects from Romania to the U.K.
The cost of the 1,600-megawatt Olkiluoto-3 reactor, supplied by a consortium of France’s Areva SA and Germany’s Siemens AG, more than doubled to an estimated 8 billion euros ($10 billion), while Electricite de France SA’s new reactor in Flamanville is also running late and is almost three times over budget.
While EDF, Hitachi Ltd., Iberdrola and GDF Suez SA plan a combined 16 gigawatts of power stations in the U.K., EDF is the only company making progress with its proposals. Centrica Plc, EON SE and RWE AG have withdrawn from British nuclear projects.
“Five years ago, our mid-term plan was built largely around new plants and only a small part was dedicated to existing plants,” Brachet said. “Now our business model is relying more on the life extension of the existing fleet than on building new reactors.”
The U.K. needs to build 16 gigawatts of new capacity by 2025 to replace aging stations. The British government is in protracted talks with EDF, one of the investors, to agree on a price for power from a planned new plant at Hinkley Point in southwest England.
In continental Europe, Westinghouse, which is owned by Toshiba Corp., is pinning its hopes on the Czech Republic, where it’s competing against Russia’s Rosatom Corp. to supply two AP 1000 reactors at CEZ AS’s Temelin plant, which has two Soviet-designed reactors that were upgraded with Westinghouse control mechanisms.
CEZ plans to announce the winner by mid-year and sign the contract by the end of 2013.
That process also may be delayed, Brachet said. Areva, which CEZ excluded from the bidding process last October for failing to fulfil commercial and legal requirements of the tender, has said it will seek all possible legal avenues at Czech and EU levels to stop the process.
“We are concerned that Areva can delay the ability of CEZ to sign the contract this year,” Brachet said. “It can certainly happen.”
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