Areva-TVO talks on OL3 break down

30 May 2016

Long-running talks between France's Areva and Finnish power company Teollisuuden Voima Oyj (TVO) over cost overruns and delays to the construction of unit 3 at Finland's Olkiluoto NPP (OL3) were called off on 26 May. The dispute is over the liabilities relating to the EPR reactor being built at OL3 by Areva and its German partner Siemens. Construction is nine years behind schedule and significantly over budget. Both parties have also taken the dispute to the International Chamber of Commerce for arbitration, where Areva is claiming damages of €3.5bn ($3.8bn), and TVO €2.6bn. However, this expected to take years to resolve.
"Our understanding is that we were very close to an agreement over all major issues and principles and then came this somewhat surprising turn that the negotiations were called off," TVO CEO Jarmo Tanhua told AFP. TVO and Areva blame each other for the cost overruns, but Tanhua says TVO was ready to reach an agreement.

Electricite de France (EDF) is seeking to acquire a majority stake in Areva's reactor business but does not want exposure to the financial risk associated with OL3, originally sold to TVO as a turn-key project. Tanhua said TVO had already given its initial consent for its contract to be transferred within Areva to allow the restructuring of the French nuclear industry to proceed, and that there was a common understanding over the financial compensations. "The indemnities were one thing that had been agreed upon in principle," he said,

On 24 May Areva had said the talks with TVO were "difficult" and Le Monde reported that the talks had broken down in recent weeks. The French government early this year had asked Areva to speed up the talks as the issue was blocking the planned nuclear industry changes. Earlier in May, Areva CEO Philippe Knoche told a French parliament committee that talks with TVO were progressing but had not been conclusive.

Meanwhile, the French government is considering selling its stake in Peugeot owner PSA Group to help fund a €3bn aid package for EDF, according to the Financial Times (FT). EDF has €37bn in net debt and needs money to pay for costly investments, including the Hinkley Point C NPP in the UK and an estimated €55bn bill in the coming decade to increase the lifespan of France's 58 nuclear power reactors from 40 years to 50 years.

The government is seeking to raise billions of euros after promising in April that it would provide three-quarters of the €4bn that EDF needs in a capital raising. It has also already promised to participate in a €5bn capital raising for Areva.

Through holding company APE, the government currently owns more than €60bn-worth of assets and has investments in 14 listed French groups and is looking for ways they can be used to raise money. Selling its PSA Group stake is a possibility because the investment is considered "non strategic", according to a source close to the situation. However, other options are also being pursued. These include the sale of the airports in Nice and Lyon which are expected to raise between €1.5bn and €1.8bn. Other possibilities include the sale of some of the government's shares in Renault, in which it holds a nearly 20% stake, the FT reported.



Privacy Policy
We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.