Platts - Tuesday, February 13, 2007 http://www.platts.com ------------ UK nuclear build faces uncertain economics: analysts London (Platts)--13Feb2007 British Energy's call Tuesday for partners to design and build new nuclear plants in the UK may not be justified by the economics of nuclear energy in that country, analysts said. BE, the UK's largest power generator, said it was inviting potential partners for new nuclear generation projects in the UK. The invitation was premised on government support for new build. Prime Minister Tony Blair's government has backed new nuclear construction, and a White Paper, due out in March, is expected to confirm that position. But the government has publicly ruled out subsidies, and low carbon and gas prices coupled with uncertain design and construction costs may make any projects too expensive to turn a profit, analysts said. "The economics of gas generation relative to nuclear is too close to call, in our view," Swiss investment bank UBS said last month in a research note. Another analyst was more pessimistic. "It's very, very marginal whether you build new nuclear without a subsidy," one analyst, who asked not to be named, said Tuesday. "It's borderline whether you would make that kind of investment." Steve Thomas, professor of energy policy at the Public Services International Research Unit at the University of Greenwich, said the only reliable benchmark for new nuclear build in west Europe was TVO's 1,600-MW Olkiluoto 3 European Pressurized Reactor in construction in Finland. "It's not going very well," Thomas said. "The cost to contractor Areva is acknowledged to be Eur500 million ($648 million) over budget after only 18 months' construction. Much of that relates to time overruns, with the plant a year and a half behind schedule. It means that the final cost is unlikely to be less than Eur4 billion." Thomas said comparisons were hard because of differing contractual specifications. The original Olkiluoto-3 budget of Eur3 billion comprised two fuel charges, where traditionally only one is included. It also included interest charges during construction, another anomaly. EDF's Flamanville EPR budget, which does not include fuel, is 10% more than TVO's at Eur3.3 billion. "The UK Department of Trade and Industry has modelled a capital cost for new build in the UK at "Olkiluoto-plus-20%," so around Eur3.6 billion," Thomas said. "But since there is no reactor technology specified by the DTI, and since its central case does not foresee a reactor completed before 2021, it is extremely hard to see anyone committing to a technology or a price that far out. To put it in context, there would be at least three general elections before the first UK reactor went into service." The DTI's November analysis said that under certain circumstances--including historically average gas prices, carbon prices above current levels and capital costs well below those for the last UK nuclear station--new nuclear build would be economically feasible. "Nuclear generation is likely to be justified in a world where there is continued commitment to carbon emissions reduction and gas prices are at or above 37 p/therm," DTI said. But carbon prices have fallen steadily, with December 08 contracts at around Eur13.70/metric ton of CO2, and Platts data indicates an annual gas price of 31.70 p/therm. BE Tuesday acknowledged that the government and industry needed to do further work, including long-term arrangements for carbon reduction, plans for waste, decommissioning, planning and regulatory approvals, pre-licensing plant designs, and assessing sites for suitability. Barclays Capital in a research note said the stock market would likely react negatively to any companies that look to partner with BE on nuclear projects. "In our view, these potential partners are likely to be companies such as [France's] EDF and [Germany's] RWE, and it possible that there could be negative headlines on these companies over the next few days concerning the levels of investment required in any such projects," Barclays said. But Barclays added that government policy outlined in the White Paper would ultimately be critical to providing suitable conditions for investing in new nuclear power plants. Not all analyses are pessimistic. UBS said nuclear would likely end up cheaper than gas-fired generation. "In the longer term, if carbon costs rise as we expect, we see nuclear becoming the lower cost choice," UBS said. ------------ Jan Edberg takes over as managing director of Forsmark Feb 12 London (Platts)--13Feb2007 Jan Edberg took over as managing director of Forsmark February 12 and Bertil Dihne replaced him as managing director of Ringhals, Vattenfall said in separate statements February 9 and February 12. Vattenfall has majority ownership in both plants. Edberg was managing director at Forsmark from 1997-2000, before taking the top job at Ringhals. Dihne was most recently head of Vattenfall Fuel and before that spent many years at Ringhals in various positions. Edberg takes over from Lars Fagerberg, who resigned February 8 in the midst of escalating safety culture and management problems at Forsmark. ------------ DTE Energy to look at building new nuclear plant at Fermi site Washington (Platts)--12Feb2007 DTE Energy plans to apply for a combined construction permit-operating license, or COL, for a new plant on its Fermi site, Chairman/CEO Anthony Earley said February 12. In a speech to the Detroit Economic Club, he emphasized that the application for a COL did not represent a commitment to build a new plant. But because of the long time required for NRC review of the application and for construction of the plant, "we need to take this step immediately to have any chance of having a new plant operating in the next decade," Earley said. Also, he said, DTE needs to move quickly to meet the deadlines for financial incentives for reactor construction under the 2005 Energy Policy Act. The planned site for the new reactor, in Newport, Michigan, houses Fermi-2, a 1,217-MW BWR, and the shutdown Fermi-1 sodium-cooled fast reactor. ------------ Swiss energy companies prefer nuclear to meet future demand London (Platts)--12Feb2007 Swiss energy companies prefer new nuclear to meet future demans, according to a poll released February 7. The survey was conducted by Accenture in cooperation with the St. Gallen Institute of Technology Management. They polled 87 utilities and energy-intensive enterprises on their preferred solutions to preventing energy shortfalls in the future. Some 40% of respondents chose nuclear power, with 31% favoring a mix of gas-fired and nuclear plants. The latter is the strategy proposed by the Federal Energy Office. Only 8% of those polled preferred alternative energy sources, while 13% believed massive reductions in consumption should be sought. No support was registered for long-term electricity import contracts. ------------ AEHI announces land purchase for Idaho's first reactor Washington (Platts)--9Feb2007 Alternate Energy Holdings Inc. announced an agreement to purchase land for a new reactor in Idaho. AEHI said the agreement, signed February 1, is to buy 4,000 acres on the Snake River in southeastern Idaho from an Idaho farmer. The deal, worth about $20 million, is tentatively expected to close in March, said Don Gillispie, who heads AEHI and formerly was a senior vice president at Nuclear Management Co. The company has proposed building a 1,600-MW reactor at the site to provide electricity for local farm irrigation and the state power grid. Power from the site would also be sold into the national energy market, it said. The reactor would be Idaho's first commercial reactor. ------------