Enel Drops Participation in Flamanville EPR as Project Costs Soar by $2.6B

A day after French utility EDF released a cost update for its Flamanville EPR reactor under construction in Normandy, France, claiming increases of a stunning $2.6 billion—bringing overall estimated costs for the advanced reactor to $10.5 billion—Italian power giant Enel formally withdrew its participation from that project and five other French EPR projects.

EDF said in a statement on Monday that, though the construction schedule for the 1,630-MW EPR was on track for production of the first kilowatt-hours in 2016, calculations for the full cost of the reactor had soared by $2.6 billion since the last cost revision in July 2011. The EPR, which was designed and is being built by French nuclear firm AREVA, is the first third-generation reactor—and the first reactor in 15 years—being built in France, a country that procures nearly 75% of its power from nuclear energy.

EDF said that beyond this "first of a kind" effect, "other factors" had a bearing on total construction costs of the 2007-launched Flamanville EPR, including "development of the boiler design, additional engineering studies, the integration of new regulatory requirements and everything learned in the wake of Fukushima." The update also reflects "additional costs as well as technical contingencies, such as the replacement of 45 consoles and the knock-on effects of this in terms of work scheduling and the financial impact of extending the construction deadlines."

On Tuesday, Italy’s Enel withdrew its participation in the Flamanville project and in another five French projects slated to use EPR technology, citing cost overruns and delays, a significant drop in power demand, and an uncertain timeframe for nuclear investments in the nation resulting from France’s recent about-turn on nuclear policy. A June 2011 referendum in Italy—just months after the Fukushima disaster—that opposed the development of nuclear energy in that country had also "diminished the strategic relevance of the overall partnership framework," Enel said.

Relinquishing its 12.5% stake in the project, Enel is to be reimbursed $801 million plus interest for prepaid expenses. The company was exercising an "exit right" per a 2007-signed strategic agreement, it said. Termination of the agreement also cancels the supply of 1,200 MW starting in  2012 by EDF to Enel under "anticipated capacity contracts." It also annuls knowledge transfer agreements between the two companies. Enel said, however, it would continue operations in the French power market through a presence in renewables, gas, and power trading activities.

AREVA is building three other EPRs around the world: at Olkiluoto 3 in Finland and Taishan 1 and 2 in China. Arbitration proceedings between an AREVA-Siemens consortium and Finnish utility Teollisuuden Voima Oyj (TVO) are under way to settle a dispute over who should be responsible for about $2.3 billion in cost overruns incurred as a result of delays at the Olkiluoto 3 plant. Construction of the project, which had been hailed as one of world’s first EPR plants, began in 2005 and was scheduled to be completed in 2009, but late last year, TVO announced the reactor wouldn’t be grid-ready until at least 2014. AREVA in September announced that a project to build two EPRs at the Taishan nuclear power station in China recently fit the dome of the second reactor building, an operation that marks the end of major civil engineering work on the reactor buildings.

EDF on Monday said the Flamanville EPR had to date also reached several significant milestones. Civil engineering at the site was 93% complete and 36% of the electromechanical equipment was in place. "The EPR will contribute to the country’s energy supply and also represents one of the essential links which will ensure the continuity of our nuclear know-how, both in France and internationally. This major site is also a feat of significant industrial achievement, in terms of the technological challenges that have been overcome throughout the sector," said Hervé Machenaud, group executive director of EDF Production and Engineering.

Sources: POWERnews, EDF, Enel, TVO

—Sonal Patel, Senior Writer (@POWERmagazine)