French energy company Engie, formerly known as GDF Suez, has signed a convention with the Belgian government to extend the life of units 1 and 2 at the Doel nuclear plant by 10 years until 2025 and also agreed the terms of a new nuclear tax. The agreement also includes the resolution of a dispute between Electrabel and Belgium for €100m in 2015 and €20m in 2016.
Engie will invest €700m ($742m) in the plants and pay an annual fee of €20m to the Belgian energy transition fund, which was set up in June, as part of the life extension arrangement. It is also investing €600m in Tihange NPP 1 its continued operation. Conditions relating to Tihange 1, whose operation was extended for 10 years by the previous legislature, remain unchanged.
Engie said the convention establishes "a stable legal and economic framework for the future".
“This convention is subject to the approval of two laws by the Belgian Parliament," the company said. Terms of the deal were first agreed in July. Engie's Belgian subsidiary Electrabel will also pay €200m in 2015, €130m in 2016, and a variable contribution of at least €150m from 2017 to 2019 for the Doel 3, Doel 4, Tihange 2 and Tihange 3 facilities. The 2017 contribution will be calculated based on a formula based on changing costs, production volumes and future electricity prices. From 2020 and every three years, the minimum contribution will be reviewed by the Commission for Regulation of Electricity and Gas based on the economic situation at that time.
The contribution is a special tax imposed by the government on nuclear generation. The nuclear tax was increased by the Belgian government in 2012 and is meant to contribute towards NPP dismantling and decommissioning. In July 2014 Electrabel said it would reconsider its operation of nuclear palnts in Belgium because the tax brought the company into "an unfavourable economic position". Taking into account all taxes paid in 2013, together with €422m for the nuclear tax, the total was higher than its operational income and had brought it to a loss for a second consecutive year. Electrabel had argued the tax was "confiscatory" and did not take into account the sharp decline in electricity production from nuclear energy.
Engie's earnings have also been impacted by the shutdown of Doel 3 and Tihange 2 because of safety concerns. The company on 1 October cut its 2015 earnings forecast by €100m as the halt of the two units was extended until the start of 2016. The shutdowns are reducing the group's net recurring income by about $40m a month on average, Engie said.
Belgium's government said in July 2012 that Doel 1 and 2, both 433MWe pressurized water reactors that began operating in the mid-1970s, were to close in February and December 2015, respectively. However, last December the new ruling coalition agreed that the units could continue operating for a further 10. In early October, the Federal Agency for Nuclear Control approved an action plan submitted by Electrabel in April, outlining measures to ensure the continued safe operation of the units.