Nuclear reactor clean-up weighs on EDF
French utility faces questions about whether it has set aside enough to decommission power plants
In 1997 French utility EDF started to dismantle its first nuclear power plant, a 30-year-old heavy water reactor in Brennilis, north-western France. It was expected to cost €250m.
The bill is now set to be at least half as much again, and the decommissioning is still not done. In fact, there has never been a full dismantling of a reactor in France, the only European country to get three-quarters of its electricity from nuclear power.
EDF, the operator of all 58 of France’s reactors, is preparing to build a new £18bn plant at Hinkley Point in the UK that some at the Paris-based company have warned is too dangerous given its stretched balance sheet. EDF’s other big reactor project, at Flamanville in France, is already six years behind schedule and €7.2bn over budget.
Hinkley and Flamanville have focused attention on another looming challenge for EDF: has the company set aside enough money to cover the huge cost of dismantling and cleaning up its existing nuclear power stations in France?
Unlike the UK, where the state has assumed much of the financial risk of taking apart nuclear reactors, in France it all falls on EDF, which has established a €23bn special fund for this purpose.
The €23bn — much of it invested in equities and bonds — has been set aside to cover what EDF estimates will be the €54bn cost of decommissioning the 58 reactors and safely storing their radioactive waste. This includes €23bn for dismantling the power stations, and €26bn for managing spent fuel.
Yves Marignac, director of energy research group WISE-Paris, is one of several European academics who think that the true cost of decommissioning and waste disposal for EDF will be far more than the figure the company anticipates.
“The dismantling programme will cost more than EDF has estimated, maybe three times more,” he says. “It could potentially be disastrous for the group when they have to readjust their assumptions.”
EDF is simply too optimistic, adds Mr Marignac. According to figures published by the European Commission this month, France estimates it will cost €300m per gigawatt of generating capacity to take apart a nuclear reactor, far below Germany’s assumption at €1.4bn per GW and the UK of €2.7bn per GW.
The commission cautions against making comparisons between countries, because member states use different nuclear technologies, among other issues.
But to put things in context, Germany has set aside almost €38bn for the decommissioning of 17 nuclear reactors. France, with more than three times as many reactors, has €15bn less for the same process.
EDF and the French government say they are confident they can deliver on the decommissioning programme, helped by the standardisation of the country’s reactors compared to other countries.
France typically has multiple reactors on one site as well, which further reduces the costs. Brennilis was a prototype, a complicated early model and so “not representative” of the wider fleet of reactors, according to EDF.
In January, a government-commissioned report confirmed previous studies, the first of which was done in 1979, by estimating a cost of €309m per GW to dismantle France’s reactors.
Jean-Marie Chevalier, professor emeritus at Paris-Dauphine university and partner at the Cambridge Energy Research Associates, says that EDF is right that comparing costs between countries is hard.
But if the past in anything to go by, says Mr Chevalier, decommissioning costs for EDF are likely to be revised up. “What is clear is that we are underestimating the future cost of nuclear [decommissioning],” he adds.
Pierre Georges, analyst at Standard & Poor’s, says that for EDF the problem is that €23bn of provisions for decommissioning and waste storage is a large amount for a company that has big borrowings. Net debt stood at €37.4bn at the end of 2015.
“Given the size of these provisions, the already relatively high financial leverage, there is little headroom within [EDF’S] current ratings,” he says, adding that “any material change in the value of the provisions could have an immediate impact on the company’s credit quality”. EDF has an investment grade rating with S&P.
EDF faces several major investments. As well as the £18bn Hinkley Point project, EDF is involved in bailing out reactor designer Areva by buying a controlling stake in its reactor business for €2.5bn. It is also extending the life of France’s existing nuclear power stations until 2025, at a cost of €55bn.
And it is not just the decommissioning of the 58 reactors that is of concern. The estimated cost of storing radioactive waste — potentially for thousands of years — has been steadily rising.
EDF was given a shock in January when an analysis by Andra, the French authority responsible for managing nuclear waste, prompted the government to set the cost of the Cigéo national repository, a planned new disposal facility in north-eastern France, at €25bn.
This was €5bn more than EDF anticipated. The utility is charged with paying for the bulk of Cigéo’s construction.
Fabien Schilz, who is in charge of decommissioning at ASN, France’s nuclear safety regulator, says the disposal of radioactive waste is the “big concern” for him rather than the dismantling of the reactors.
“This is very complicated,” he adds. “We need to dismantle the old nuclear waste storage facilities and move it to a new facility, which is not even built yet.”
There are currently two nuclear disposal sites in France. The most dangerous radioactive material, stored at La Hague in northern France, is due to be moved and buried 500 metres underground at Cigéo.
The new disposal facility is scheduled to begin operations in 2025, but the project has been held up by a long legal process due to local opposition.
EDF says that the gap between its €23bn fund to cover decommissioning and waste storage and the estimated €54bn cost will be closed through the appreciating value of its investments.
The company also says that at the end of 2015, based on projected growth in the value of its €23bn fund, it should cover 99 per cent of the €54bn of costs.