lundi 17 avril 2017

Fessenheim nuclear plant shut down: the pros and cons.

Nuclear power station shut down in France: rather for political reasons or technical ones?

Map of French nuclear stations

Here are the parameters of the situation:

The nuclear power station of Fessenheim (Eastern France) is the oldest one of the French nuclear park (the old lady will compute 40 years of production in 2017). As such, it was considered to be the first to be closed in the wake of a green energy transition period. Nevertheless, EDF, Électricité de France, the operating utility, gathered its board of Directors in order to take a decision about the station decommissioning on April 6th.
The final decision was to postpone the closure after the commissioning of Flamanville EPR nuclear station (in Normandy, West of France), in order to avoid to produce less than the  63,2 GW limit set in the 2015 energy transition law. Though technical delays, this commissioning is still scheduled for late 2018. Moreover, the decision gives EDF the possibility to choose to close either the Fessenheim station or another one.

Nevertheless, the Fessenheim closure is still a thorny issue in a blurred political electoral campaign, but also for economic reasons.

Why all this fuss and this open opposition between EDF and the French government?

First, the closure was an electoral promise of presidential candidate Hollande
As soon as he expressed his idea, a lot of counter-measures were launched at a missile speed, the first being the job impact on the local area: indeed 2,000 workers are directly or indirectly involved in the nuclear plant. So what? 2,000 jobseekers more in a context where the joblessness is still skyrocketing?

Second, still on the political ground. in 2015, the law on energy transition was adopted. This law stipulates that the nuclear part in the French energy mix should be reduced from 75% to 50%. That’s implying that several power stations should be closed. But it implies moreover that the possibility of growth of EDF shall be sharpened widely. That’s a perspective that no company would accept easily, for the simple reason that the obvious aim of everybody’s company is to expand and expand its revenues.

What are the economic consequences of the Fessenheim closure?

Beyond the 2,000 positions jeopardised by the closure, here are some financial figures which may need a thorough analysis.
Indeed the power station delivers some €400 million of Ebitda, depending on the power wholesale prices.
Then, what is not so much emphasized in the public media, a third of Fessenheim station production is allocated to minority shareholders, mainly from Germany and Switzerland: EnBW, Alpiq, Axpo and BKW (they account for 15% of the capital of the power station), to pay for their minority stakes in the capital.

So, these financial parameters entail a compensation to be paid to EDF in case of closure, as a kind of damage: some €490 million shall be paid when both reactors will be shut down (normally in 2019 and 2021), with an adjustment made depending on power market price, until 2041.

Fessenheim power station, what is it?
The power station is composed of two reactors of 900MW each.
The station is located in an area considered as presenting seismic exposure and exposure to floods.
The staff accounts for 750 workers but gives work to some 1,250 more among contractors and
regional local firms.

EDF: a state company or an hybrid monster? 

You already know the hybrid vehicles but you don’t know what is a hybrid monster in the field of companies and societies…

The negotiations around Fessenheim closure highlight several judicial, economic and regulatory points which may be difficult to understand abroad.

Even if the French State is EDF’s main shareholder (its stake amounts to 85% of the capital), the State was unable to compel the company to abide by the presidential promise to shut down Fessenheim station. This promise was only words. Why? Because a president can’t decide by himself to close this or that: only the operator (here: EDF) or the ASN (the French nuclear watchdog) can apply a request for closure, either for lack of profitability or for security reasons (in the ASN case). The request procedure is really long and difficult.
Moreover, as a stakeholder, the State has appointed six administrators in EDF                                                                         board of Directors. But during the sessions, it’s forbidden for the State to vote when it is involved as a party in the negotiations. So its six administrators could not take part in the votes and decisions. Only the staff representing administrators and the independent ones remain able to vote, which make the final decisions really uncertain.
Then, when the president decided to reduce the part of nuclear generation in the energy mix from 75% to 25%, the law corresponding to this was amended several times, only to conclude that the part of the nuclear generation should not be above the present production, namely 63,2 GW, and EDF is interpreting this threshold not as a roof but as a bottom line.
Finally the implementation of an energy multi-year planning reportedly designed to pilot the State action in the energy field was not awarded to any ministry but to… EDF.

The Fessenheim case illustrates several dysfunctions: during five years, 2,000 jobs have been threatened by a possible closure. It’s simply non-economical.
Moreover during the discussions, the possible setting of a nuclear dismantling sector or the industrial future of the nuclear sites have never been considered.

From Véronique LeBillon and Anne Feitz, « Les Échos »

jeudi 16 mars 2017

French moves on the Californian Coast

Mrs Isabelle Kocher, Engie CEO

ENGIE group is acquiring more and more US companies in energy efficiency sector.
Last week, after her presentation of the corporate financial statements, which may be deemed as lacklustre, Isabelle Kocher, Engie CEO, is touring the United States to prove that the turn taken by her company consists in a real commitment to change.  «  In this country, the change experienced by the company is the most obvious, as the United States are a blessed place for energetic transition,», she said when travelling in California. Even if the US share in the turnover hardly amounts to 50%, the company intends « to develop strongly there », she said, without giving any further detail.
Since several years, the company has been present in the US in the sector of generation and distribution of power, and now, the corporation is in the wake of changing its offer to improve BtoB services, which has been one of the aims of the late GDF Suez during its repositioning towards low-carbon activities. After selling hydraulic power stations, the company has just concluded the transfer of some 8,7 GW of thermal assets (mainly gas and cool) for an amount of USD3,3 billion, as the profitability of these activities  sharply decreases, because of oil price drop and reduced volumes.
Energetic and digitized innovation
Considered as the European leader in services sectors, Engie intends « to bring a real know-how on an American market, divided among a multitude of local actors », says Franck Demaille, manager of the North America division. On a long-term perspective, Isabelle Kocher considers that « The American section may compete with our European activities, which amount to 80% of our revenues in the field of services".
The company intends particularly to take advantage of « the coupling between energetic innovation with digitized innovation », which is presently taking place on the West Coast, for instance in California. In that view, she has thus decided to implement the major part of her acquisition programme in this region.
 In 2014, the company acquired Ecova, a company specialized in consultancy on energy economies. More than 700,000 sites owned by 700 customers B to B are plugged on Ecova data management centre platform, which gives advice on how to reduce one’s energy invoice. Then in 2015, Engie acquired Retroficiency, another software designer, which cross-checks the statements made by the smart meters with public data, in order to implement a « quick and advanced » audit, said Isabelle Kocher
 In January 2016, the group added a new brick when buying out OpTerra, a company which has been implementing all the works necessary to reduce energy consumption since forty years. In May, Engie took control of 80% of Green Charge Networks, whose services consist in offering a management system to smooth battery consumption. Engie considers other purchases to increase its market share.  Will the group be able to develop the profitability of these serial acquisitions? That’s the question as French companies often face a difficult challenge in California.
Anaïs Moutot, Les Echos

vendredi 27 janvier 2017

At Hinkley Point EPR site, Father Christmas has brought a fabulous gift to civil works operator Bouygues: some €1,7 billion.

Hinkley Point EPR site will award to Bouygues, the French civil works operator, some €1,7 billion.

source: EDF

EPR construction represents a kind of gigantic scale. Beside being France’s nuclear nec plus ultra, the site intends to become EDF’s window in the field of nuclear power stations.

Now, the proportion of Bouygues’ share in this agreement concluded in 2014 has been identified surely to amount to €1,7 billion. In fact, Bouygues is a partner of the British Laing O’Rourke in the Bylor consortium. The joint-venture won the tender in 2014.

Therefore, Bouygues’ order book has got a fabulous gift from Father Christmas: around €1,7 billion for the construction of the buildings containing both EPR. The joint-venture, composed of Laing O’Rourke and Bouygues, were awarded the construction for Hinkley Point C in last October 2014. But this amount couldn’t  enter Bouygues’ financial statements as it was not really effective, as the joint-venture has to calculate which part was to be allocated to the French partner.
At the beginning, , the part of civil works of the nuclear power station was around £2 billion (namely €2,3 billion) but the figure changed since then.
In a press release, Bouygues has reminded that « Hinkley Point C power station will produce some 2,3 gigawatt. Moreover, it will deliver power to more than 5 million households, accounting for 7% of the total power consumption of the United Kingdom ». The project shall manage some 3,500 workers at the summit of activity.

A third contract for an EPR power station

Hinkley Point C shall be commissioned in 2025. This agreement is the third of the kind to be awarded to Martin Bouygues’ company for nuclear power stations using the new EPR technology (European pressurized reactors). Bouygues has been already chosen by Areva to build the Finnish Olkiluoto station in 2005, then by EDF for the French Flamanville station in 2006. Before, the company was involved in second-generation power stations construction in France, such as Bugey, Saint-Alban and Chooz.
But Olkiluoto as Flamanville have recorded delays and impressive overcosts. Both sites seem to concentrate incidents.

For instance, in Olkiluoto, even if civil works are not involved in the present disputes, the site has recorded a nine-years’ time delay and overall invoice has increased from €3,5 billion to €8 billion. The dispute between Areva and TVO, its Finnish client, is still waiting for decision in the hand of the International Arbitration Court, which may issue a decision this year… or in 2018. TVO claims for €2,6 billion of penalties, whereas Areva claims for €3,4 billion of damages.

Some budget deficits were seen also on Flamanville site and the total amount of invoice has more than tripled to reach some €10,5 billion. Suffering from various faulty procedures, a new one has emerged recently: the problem of carbon concentration in the tank and the lid of the reactor tank, built in Areva’s Le Creusot site. The Authority for Nuclear Safety ( the French nuclear watchdog) has required several sets of tests. This institution shall take a final decision at the end of first semester.

Gigantism of the figures, of the number of people involved, of ambitions.

Read further:

mardi 22 novembre 2016

Commissioning Flamanville EPR in 2018? Really? Yes, answers EDF

From "Les Échos", November 15th, written by Véronique Le Billon

The French power operator grants that Flamanville reactor tank will abide by regulatory standards and that the EPR shall be commissioned in late 2018. Moreover, the company forecasts a €5 billion cost-reduction for its own reactor models.
On site, the visitor smells warm iron of welded metal, sees scaffolds still congesting the machine room and meets some 4,300 staff of EDF and contractors working in the maze of hallways and stairs, but now, the site really looks like a nuclear power plant. EDF expresses its confidence to be able to commission the reactor in late 2018, during a visit on Flamanville construction site on Wednesday, following its CEO’s pledge made in September 2015, whereas the project has recorded several overcosts and delays.

The program is challenging but realistic.

« We consider that the project is back on track. The program is quite challenging but realistic and we will stick to the next scheduled steps », said Xavier Ursat, who is the group executive director in charge of new nuclear projects. The first assembly trials of the reactor are scheduled before the end of 2017 first quarter, confirmed EDF. The last assemblies and completion shall last until the end of next year, outlined Bertrand Michoud, who has just been appointed manager of the « FA3 » project. Launched in 2007, the reactor should have been first commissioned in 2012.

« Fit for service »

The public power operator displays the same confidence about the compliance of the EPR tank, though an excessive carbon concentration, detected in the lid and in the bottom of the tank in late 2014. EDF and Areva have launched trials on three representative parts of the tank, which shall last in a ten days’ time. « We have already got nearly 90% of the results, and all these figures comply with the standards requested by the Nuclear Safety Authority (ASN, French acronym). And the 10% left are made in areas where the carbon concentration is much smaller», said Laurent Thieffry, project manager of Flamanville 3. « Thus, we are very confident in the fact that the tank shall be deemed fit for service ».
Following the « defects » found in the production files on the Areva plant of Le Creusot (Saône-et-Loire), EDF is waiting also the results of an audit made by Areva on 93 parts ; this audit shall be concluded in late December. As for Fessenheim 2, the NSA has already requested controls on the resistance of a steam generator, whose data production have been forged. The investigation will last six months, but, on that point also, EDF shows confidence.
Finally, the power operator is waiting the three-year extension of the decree of authorisation to create the nuclear facility, which shall normally expiry next spring.

Taishan site in China

Last week, EDF CEO, Jean-Bernard Levy, visited Taishan site, in China, where EDF shall be  joint operator of two EPRs together with CGN, its Chinese partner (with a 30% stake for EDF). Taishan 1 shall be the first EPR in service in the world, unless a particular event happens. The trials in conditions of pressure and temperature (known as « warm trials ») have just begun. Charging fuel is expected before the end of 2017 first semester, before the operating commissioning (functioning at full power), some months later. Taishan 2 shall be commissioned six months to one year later.
Wednesday, beyond the Flamanville 3 project agenda, EDF confirmed also that the revised budget won’t change, namely « at maximum €10,5 billion ». At the beginning of the project, the budget amounted to €3,3 billion.


A new variant of EPR

EDF is working on the design of an optimized version of the EPR, which may result in a cost reduction of €5 billion of its EPR NM (EPR new model), compared with the cost of Flamanville EPR for the same power (1,650MWh). Among the different possible options, which are not yet decided according to Xavier Ursat, there are : the choice of a simple containment building around the reactor building, and three instead of four « safety trains », which are safety devices allowing the reactor safety by redundancy. Discussions are already scheduled with the NSA.
In operating conditions, 420 staff will work on Flamanville 3 beside the two other reactors. The operating room (control-command) has already been transferred to the operator.


Olkiluoto site in Finland

In Olkiluoto, far from Flamanville and EDF’ confidence, TVO, the Finnish partner, shows deep worries about the end of the EPR construction, built with Areva. The project started in 2005, but, the years coming by, it has become an industrial quagmire for the French group, torn apart between delays and overcosts.
TVO worries about the consequences of the French nuclear sector restructuration, according which EDF shall buy Areva’s reactor division (known as Areva NP), but with the exception of OL3, the Finnish EPR project. « TVO is really aware that the future Areva SA won’t have the necessary financial resources to conclude the project », hammered a spokeman on Wednesday. The (Finnish) group « considers that separating the ownership of the agreement from the necessary resources to finish and to commission the OL3 EPR is not a fair behaviour from the part of a nuclear technologies manufacturer ». 

lundi 15 août 2016

Hinkley thorny Point


Hello Readers,
Hope you are doing well this summer. These holidays have been spilled with a lot of surprises, the last but not the least being the Brexit.
As a neighbor of Great Britain,(and a good practitioner of its language too, ahahah), I was already betting on "yes to the EU" (it has been one of some mistakes I've made this year), I was wondering about the consequences of this referendum, without judging it, because as the say puts it:
"Vox populi, vox Dei" : people's voice is God's voice. (sorry for the atheists or agnostics, it's the say!)
So, repeating myself, I was wondering about Brexit consequences on a few issues influencing the global energy sector.
As you know, this blog intends to make you visit the French energy sector, in oil and gas, nukes and renewables. But it aims also at making you understand how France is functioning in general: every translated article gives you the hexagonal view on dealing with energy transition, oil price fall and so on, so that you have an insight picture of how things are working in my country.
I know it's quite ambitious ahaha, but even if I am a European, know 4-5 languages, I found it difficult to guess what's life is on beyond the Rhine, the Channel or the Atlantic Ocean.
We are so far involved in our daily life that some events happening abroad takes us by surprise, because we don't live there, so we can't understand what's going on there.
So even if we, French people, don't live far from England, have many links with this country, even French people try to speak better English, ahahha! the decision of leaving the UE left us mouth wide open.
And of course, HINKLEY POINT could not escape my inquisitive pen!
So let's go there, are you ready?

At the end of July, it looked like everything was relying on EDF final decision taken by its board of Directors:

Following is an article taken from les "Echos", an independent economic daily paper, about the subject:

The final decision shall be put to vote during EDF’s council of July, 28th. The impact of independent administrators’ votes shall be of importance.
Mr. Jean-Bernard Lévy’s wish, EDF’s CEO, has been settled : the final investment decision in the Hinkley Point EPR, located in South-West England, shall be taken before the end of the month, during July, 28th council. The notifications were sent to the administrators late in Thursday evening, after a meeting hold between François Hollande and Theresa May, the UK’s new Prime Minister. « The subject has been raised during the dinner », said a source close to the case. « EDF was waiting the « go » from the Head of State. »
This point was a thorny issue for the public group, as the decision has been postponed several times during last months. The project, amounting to GBP18 billion (namely €22 billion), financing excluded, is deemed to bridge the future of the French nuclear sector, according to EDF’s perspective. This decision shall launch the construction of both nuclear reactors, whereas EDF has already engaged GBP2,4 billion in prerequisite studies, then the earthwork, roads in the site, and other preparatory works. The first concrete is scheduled for mid-2019, corresponding to a supposed commissioning in 2025.
If some partners bet that the vote of the council will be positive, the decision will in fact be taken by the independent administrators (Laurence Parisot, Colette Lewiner, Philippe Crouzet, Bruno Lafont and Claire Pedini).  The State, which holds a 85% stake in the public group, has six administrators, who represent it and who will be favouring the project. Nevertheless, the six staff representatives are fiercely opposed to the Hinkley Point project. Jean-Bernard Lévy, EDF’s CEO, who is accounted among independent administrators, has got a casting vote. « Jean-Bernard Lévy would not submit this decision to vote without waiting a positive result. But everyone is responsible and should vote according one’s heart », highlights an administrator.
Staff representatives, who are denouncing a « method to forcing decision » have already submitted an emergency judicial case this Monday in the name of the company’s staff central committee. The CGT- CCFE-CGC and FO federations (left-wing industrial trade-unions)  indicated on Friday, in a press release, that they will support the representative instance in doing so. In April, the Central Committee obtained the right to be consulted on the decision, but as the organisation pointed that a lack of documentation prevented it to take a position, it filed a motion for urgent proceedings against the group. Whereas the hearing was scheduled on next September, 22th, EDF’s chair board maintained the date of July, 4th to examine the project, and since then, deemed that the consultation has been forgone, even if no position were published. « In my opinion, there is a judicial risk », said an administrator, who is not a staff representative.
Opponents to the project shall carry on expressing their position till Thursday, hoping to convince some irresolute members of the board. In taking this decision, any vote will play an important role.
Anne Feitz, Les Echos


Here I give you a view of what was happening inside EDF, inside its board and its staff representative institutions. The situation has been quite thorny, but the internal vote "yes" has finally been granted.

So you can see that a very important point for Great Britain has not been raised : the China stake in Hinkley Point project. Nevertheless, questions remain and other concerns about the project are still pending:
Now I carry on the internal story inside the French power operator...

EDF’s Board of Directors must vote on its official position on the Hinkley Point EPR, in England. That’s a £18 billion project, which raises significant concerns.

Tough choices are open now for EDF’s monumental project in the United Kingdom. This project is highly questionable, first because of its sky-rocketing cost and second, because of the industrial risks it may entail. « Today, EDF’s end has begun » has tweeted Cyrille Cormier, a Greenpeace project manager in energy field. Conversely to this position, EDF’s CEO, Jean-Bernard Lévy deems that the project is absolutely necessary to grant his own future and that of the French nuclear sector. Here is a synopsis of some thorny points of this high risk project.

What about the financial risk ?

If the project arises so many concerns, the first reason comes from the considerable scale of the risk allocated to EDF. The investment amounts to  £18 billion (namely €22 billion), net from the cost of financing, in which EDF is committed up to 66,5% (beside China’s CGN whose stake will amount to 33,5%). Previously, EDF considered to involve Areva and other partners in order to have a minority share and to be able to deconsolidate this stake, but Areva’s problems put an end to this scenario. The project corresponds to a €1,5 billion per year, namely a 15%share of its annual average investments. EDF deems this percentage as acceptable.
Project-scepticals don’t share this view.  In fact, the EBITDA amounted to €17,6 billion, but the company’s revenues decrease with power price fall or the decrease of its market shares following the opening of the power market to competition. Moreover, the operator is expected to buy back Areva’s reactors division (namely Areva NP) for some €2,5 billion and invest in the maintenance and the life-span extension of the nuclear park in France (such operation being named « great refit »), which would amount to €51 billion.
In order to decrease a net indebtedness amounting to €37,4 billion, a recapitalisation was announced in late April (amounting to €4 billion, on which €3 billion have been subscribed by the State), together with a dividend paid in shares, a program of asset transfer (around €10 billion) and finally with an annual economy plan (€1 billion by 2019). But many observers expect that all these measures won’t be enough.
Nevertheless EDF’s direction stands for the contrary, confirming even that the English EPR will be highly profitable with a ROI amounting to 9%, after taxation. Indeed the revenues will be granted on a thirty five years’ time, thanks to a private agreement, judicially sure : this agreement grants not only the power sale price (namely £92,50 per MWh, indexed on inflation), but also the volumes of power to be sold.

Industrial risk

As delays and overcosts cumulated on Olkiluoto projects in Finland and on Flamanville project in France, EDF’s expected schedule of six years and half to build Hinkley Point seems quite optimistic. Or, every delay will impact the expected profitability. The risk is as much higher as the British nuclear watchdog has requested some modifications on Flamanville model, which will make the Hinkley Point EPR, the first of a new series. Another risk is linked to the « falsifications », which have been discovered in Areva’s manufacture in le Creusot, following the defaults detected on the Flamanville tank : some people question the ability of Areva to produce the parts of the English reactor. Following this, the manufacturing of the lid and the bottom of the tank have been awarded to Japan Steel Works.

Why EDF did not want to delay the project ?

Whereas EDF’s staff would have preferred to schedule the project later for some years, in order to take lesson from the experience return on other EPR, like those of Flamanville or Taishan in China, on the contrary EDF’s CEO intends to launch the English project, the soonest the best. A delay could have endangered the agreements which have been already concluded or, worse, would have given time for the British government to choose a competitor. In EDF’s view, the project is crucial, first because all the teams, which will end Flamanville project, will be put on the English one, and that’s necessary to maintain Areva’s know-how and activity while waiting other orders in France. The issue consists also in restoring the credibility of the French nuclear sector in export fields. After Hinkley Point project, EDF expects another order of two reactors on Sizewell site, in West England.

Who are the opponents ?

If opposition stemming from antinuclear NGOs or green MPs is quite normal, the opposition of some staff or managers of the public group arises a logical concernl. As such, the resignation of the financial director,Thomas Piquemal, sheds light on the internal oppositions to the project, even among the management. At his hearing before the Parliament in early May, he justified his position by the following words : « Who will bet a 70% share of one’s heritage on a technology, whose no ones knows if it's working, whereas since ten years every effort has been made to build it ? »
Moreover, the financing plan announced in April did not quiet down all the internal concerns. The trade-unions, particularly the inter-unions group CGT, CFE-CFC and FO, rings the bell because of the risk looming on « the industrial sector, EDF’s investments on the national territory and, consequently on employment in France ». On July, 4th, the Company Central Committee (the central staff representation institution of the group) decided that the information given by the management in order to build its own position were not affordable or enough to give its official position and, for this reason, the institution has filed a case against the management’s decision to carry on with the project without its advice. The hearing shall take place on September, 22nd. Then, the NGO representing the staff shareholders considers that the project « threatens the company’s viability » and requests the intervention of the Authority of Financial Markets. In late July, this institution launched a thorough inspection of EDF financial information since 2013. On its part, EDF says that it has launched an internal audit in its management, after which the number of people favoring the project amounts to 81-92% of the interviewed people.

What happens on site ?

In face of Bridgewater Bay, on the West Coast of England, Hinkley Point site has been waiting the official go for months. EDF already paid £2,5 billion to prepare the 175 hectare field, where both EPR will be built. Earthworks, cement factory, piped water system, power generation… all preparatory works are well advanced and they never have been stopped completely. Today some 600 persons work on site, to build the housings for workers and engineers. EDF expects that some 5,600 staffs will work on site when the works will run at their full speed. « Workers are waiting, spade in hands, and ready to start working, said the Unite trade-union. They only wait for the go »


So, repeating myself, my aim is not to give you a strict chronology on facts, which is quite abundant in Internet resources. I try to make you understand what happens inside the operator in itself.
I have not spoken yet of the delay requested by the new British government to give its position on the project. Nevertheless, I understand their reluctance towards CGN's stake in it.
I would have the same if I were in their case. They intend to protect Great Britain's independence in the energy field and that's thoroughly understandable.
The choice of China as a stakeholder has been deliberately worked by Mr. Hollande government and is following one of the main axes of France's foreign policy, whatever is thought about it. I wonder if Great Britain would have shown the same reluctance if EDF's partner would have been a major from the US or Japan?

So feel free to post comments about the subject, stay calm and polite and so would I! I will be happy to answer (or try to answer) your questions and concerns or other points. The Hinkley very, very thorny Point TV series will get other episodes!