In 2008, French nuclear giant Areva announced that it would build a massive nuclear enrichment plant less than 20 miles west of Idaho Falls, off of Highway 20 which leads to the Idaho National Laboratory and Arco.
Situated on about 4,000 acres surrounding Kettle Butte, the Areva plant would use advanced gas centrifuges to enrich uranium for the United States’ 104 operating nuclear reactors and proposed future facilities. These nuclear plants provide about 20 percent of the country’s power and the supply of dependable nuclear fuel is diminishing.
The plant promised to boost Eastern Idaho’s economy by infusing over $5 billion, adding about 5,000 construction jobs to the region and provide 400 high-paying permanent jobs. It was greeted enthusiastically by Gov. Butch Otter, the Idaho congressional delegation, and local officials.
In May of 2010, the U.S. Department of Energy offered $2 billion in loan guarantees to Areva to build the Eagle Rock Enrichment Facility and Areva announced it would break ground as soon as it raised sufficient capital to complete the plant.
But, in 2011, Japan was rocked with a massive earthquake and damaging aftershocks and tsunamis, resulting in substantial property damage and the loss of nearly 16,000 lives. The impact extended far beyond Japan with respect to the nuclear industry. Three Japanese nuclear reactors suffered meltdowns at the Fukushima Daiichi Nuclear Power Plant complex northeast of Tokyo on the Pacific Ocean.
As a result, the Japanese took all of its nuclear reactors offline and other countries, particularly in Europe, began looking for alternatives to nuclear power. Combined with the world boom in shale oil and gas, the world’s nuclear industry, including Areva, experienced a significant shock that continues to this day.
Areva announced an official delay of the Idaho plant in 2011 and has extended that delay since, while still committing to proceed once the situation improves. Since the initial pause, most Idahoans have stopped following Areva, despite the company making world headlines the past few months. The company is in severe financial trouble and the French government has been aggressively exploring options. A recently announced plan may ultimately result in the completion of the Idaho facility with its accompanying impact on the East Idaho economy.
Areva consists of two primary business units. One builds nuclear reactors and the accompanying power plant structures. That part of the company has struggled mightily the past few years. Areva’s reactor unit has staked its future on the Evolutionary Pressurized Reactor (“EPR”) that has been beset with technical and cost problems. The results have been financially disastrous.
For instance, an EPR being built in Normandy has seen its price tag jump from $3.5 billion to $9.3 billion. Another in Finland is 10 years behind schedule and Areva has been hit with more than $4 billion in delay charges. A plant in the United Kingdom at Hinkley Point is now estimated to cost in excess of $24 billion with Areva obligated to pay 10% of the total cost. These overruns have hit Areva hard in the pocketbook, leading to four straight years of losses.
But, the second part of the company, which mines, processes and supplies nuclear fuel, is profitable, generating about $2 billion a year in revenues. It has suffered some hits from some bad mining investments in Canada and Nigeria, but is a positive contributor to cash flow.
However, the nuclear reactor division of the company currently dominates Areva’s finances. The results have been catastrophic. A few weeks ago the company announced 2014 losses of more than $5.4 billion on revenues of about $9 billion.
As the 87 percent shareholder in the company, the French government has swung into action, pushing Électricité de France (“EDF”), the massive French utility company, to develop a plan to save Areva.
Last week, the Office of French President Francois Hollande announced that both companies would create a new joint reactor venture, controlled by EDF, consisting of Areva’s manufacturing and reactor maintenance components and EDF’s reactor operational units. The French government will inject funds into Areva as part of the deal.
In essence, Areva’s reactor manufacturing elements are being stripped apart from the company, leaving its uranium mining, reprocessing and supplier of nuclear fuels elements, including, presumably the future Idaho plant. EDF will control the reactor building, maintenance and operational pieces of both companies, but the remaining parts of Areva will have an independent future.
This course could be good economic news for Idaho. The launching of the construction phase of the Eagle Rock Enrichment Plant has been hamstrung by Areva’s financial trials primarily associated with its nuclear reactor construction operations. A separation from the plants in Normandy, the United Kingdom and Finland would refocus the surviving part of Areva onto nuclear reprocessing. That could easily put the Idaho plant back near the top of the list for future projects.
But, the key is for the “new Areva” to be able to find funds for the proposed Idaho plant. Potential investors will see a facility (presuming it can be run profitably) where the U.S. Department of Energy is willing to back the facility with a whopping $2 billion in loan guarantees, minimizing investor exposure. And, that view will not be clouded by multi-billion losses on European reactor projects.
It will take some time for the formal separation of Areva’s units to occur, but watch for a positive effect on the Idaho plant. I would not be surprised to see a proceed-to-build announcement in the not-so-far future.