Italy's Nuclear Revival Requires Political Guarantee, Enel CEO Conti Says
Politicians must guarantee future governments won’t reverse a decision to build atomic reactors to ensure Italy’s nuclear revival wins financial backing, the chief executive officer of the country’s largest utility said.
Enel SpA will use loans backed by long-term power contracts from industrial users to pay for four new French-designed atomic plants expected to cost 18 billion euros ($24 billion), Fulvio Conti said in an interview in Rome. Italy’s parliament voted last year to reverse a 1987 referendum that had caused the shutdown and dismantling of the country’s plants.
The regulatory framework needs to make sure “that once this program is started it cannot be stopped by a change of government, otherwise it will be a totally futile effort,” Conti said. “I’m confident we can achieve our goals.”
Enel and partner Electricite de France SA plan to build four so-called EPR plants by 2020. Delays in setting up a national atomic energy agency to regulate the program and opposition from regional authorities have raised concerns the project isn’t feasible.
“If Italy wavers or looks less committed the cost of credit for the project will rise and all your cost calculations will be off,” said Carlo Stagnaro head of energy research for think tank Istituto Bruno Leoni. “Project financing, once you have a deal, reduces some of the risk, with the producer having a guaranteed buyer and the buyer a guaranteed energy price.”
The plan, which would allow Enel to secure loans backed by long-term contracts with industrial power customers, is being used to build a nuclear plant in Olkiluoto, Finland.
“There are discussions for enacting the long-term contracts available for big end-users and single buyers,” Conti said. “I’m confident that the experience acquired will allow us to start construction in 2014 and achieve completion of the first unit by 2020.”
Conti’s plan may allow Enel to keep the cost of new nuclear plants off its balance sheet. The company is cutting costs and selling assets to help lower debt. It’s also undertaking an initial public offering of its Enel Green Power unit to achieve its goal of reducing debt to 45 billion euros by 2010, Conti said.
Conti said the Italian plants will cost 4.5 billion euros each and produce 1,600 megawatts. That’s more than France’s older generation plants which produce between 900 and 1,400 megawatts. Italy gets the majority of its power from burning imported coal and natural gas.
Enel estimates that energy generation by a nuclear power plant has the same cost as energy produced by a modern coal plant and is 20 percent cheaper than power produced from a combined cycle gas turbine. The nuclear plant’s advantage, according to Conti, is that it has no carbon dioxide emissions and is not sensitive to fluctuating commodity prices.
“My concern with the reintroduction of nuclear is that it’s not as economically convenient as it seems,” said Fabrizio Spagna, chief executive officer of Axia Financial Research. “They tell us nuclear energy is cheap, but if you factor in the huge initial costs plus waste disposal and dismantling it’s not that different from other sources of energy.”
Italy’s finance Minister Giulio Tremonti said Sept. 5 atomic energy is “key” for the country. Some regional authorities and members of the opposition disagree.
The region of Puglia in Italy’s south, headed by opposition party member and environmentalist Nichi Vendola, is among those trying to stop the process. The region said Sept. 13 it would go to court to challenge the law reintroducing nuclear energy into Italy on grounds it violates regional autonomy.
Conti said local authorities need to be better informed about the high degree of safety modern plants afford and the advantages in terms of lower electricity price. Each plant will create 10,000 temporary jobs during construction and 1,200 permanent ones during operation, he said.
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