EDF Cost Overrun at French Plant Piles Pressure on Nuclear Giant
(Bloomberg) -- Electricite de France SA said repairs of faulty welds at a nuclear plant under construction in western France will boost the project’s cost by 14% to 12.4 billion euros ($13.6 billion), adding further financial strain to the cash-strapped atomic power giant.
The latest budget hike at the Flamanville-3 reactor is yet another blow to the French state-controlled utility, which raised its cost estimate for two similar reactors it’s building in the U.K. just weeks ago. It also fuels doubts about nuclear’s future in France, where the government has been reluctant to approve new projects before Flamanville-3 is online.
EDF has increased its estimated bill for the project by 1.5 billion euros in the latest assessment, it said Wednesday in a statement. The almost-completed plant, which is already seven years behind schedule, won’t be able to load nuclear fuel before the end of 2022 as EDF needs to repair 66 welds, it said.
“The market was already anticipating some additional cost for the weld issue,” RBC Capital Markets analysts said in a note. “However, these costs, in our opinion, are slightly higher than what would have been anticipated.”
EDF shares fell as much as 1.6% in Paris, and were down 0.8% at 9.47 euros as of 10:23 a.m. local time.
EDF’s preferred scenario for repairs, which includes using remote-operated robots to conduct high-precision operations inside piping for eight welds, would push net investment to 15.5 billion euros in 2020, a 500 million-euro increase. It would trim net income by a projected 400 million euros next year, EDF said.
The utility aims to secure approval from the French nuclear-safety authority for its repair plan by the end of next year. It also has a fallback option, which would entail extracting the piping to repair the welds, but that would “probably lead to a extra delay of one year and an extra cost of 400 million euros,” EDF’s head of nuclear new-build, Xavier Ursat, said on a conference call.
The budget for Flamanville-3 has more than tripled since construction started in 2007. The repeated setbacks, which have forced EDF to sell assets to curb debt in recent years, contrast with tumbling costs for solar and wind projects. While nuclear energy can provide low-carbon electricity around the clock, spiraling costs may make it harder for EDF to convince the French and British governments to provide the support needed to help it fund new atomic plants.
The French government has asked EDF to prove by the middle of 2021 that it can build competitively priced nuclear plants to replace some of its 58 aging reactors. Competition from other clean-energy sources is stiff. France, like Britain, is working to step up the pace of building offshore wind farms.
The new setback at Flamanville also comes at a critical juncture, with EDF seeking to sell as many as six similar reactors in India. It’s competing with Russian, Chinese and U.S. builders in other markets such as Saudi Arabia.
EDF has repeatedly blamed the delays at Flamanville on a lull in reactor construction in France at the turn of this century, saying that led to a loss of knowhow. Two similar reactors built by a venture between EDF and China General Nuclear Power Corp. in southwest China successfully started up in recent months.
The delay in starting the 1.6-gigawatt Flamanville project is likely to put some strain on France’s power supply in the event of unexpectedly cold winters. The government is forcing EDF to close two 900-megawatt reactors along the German border next year, and it also wants utilities to shutter 3 gigawatts of coal-fired capacity in 2022.
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