Bloomberg News

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

January 17, 2013

Electricite de France SA will cut 1 billion euros ($1.3 billion) of costs while sticking to a plan to produce power from a new atomic reactor in Normandy in 2016.

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

The chances that EDF will have to further revise the 8.5 billion-euro price estimate of the reactor or the building schedule are “infinitesimally small,” he said.

The cost of building the EPR has escalated following changes to its engineering and design, as well as changes made in the wake of Japan’s Fukushima nuclear disaster. The utility also blamed the need to lower operating costs, which will be set out next month, on a French law that forces EDF to sell atomic output to competitors in the home market, where it is 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.”

A successful startup 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 CGNPC.

Basic Design

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

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

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. EDF last month raised the estimated cost of development to 8.5 billion euros.

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 between 18 months and two years less time.

The domed roof of the reactor building at the most-advanced EPR at Taishan is already in place, marking a “significant step” that hasn’t been reached at Flamanville, Machenaud said.

Nevertheless, producing electricity from that unit according to the “official” target date of 2014 will be “extremely ambitious,” he said. The second one is scheduled to start up 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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