EDF has kept costs under control better than Areva, but it may still struggle to stick to the €4 billion budget it has set for the EPR it is building at Flamanville on France’s northern coast (pictured). Whereas EDF’s existing fleet of plants produces power at an average cost of around €30 per megawatt hour (MWh), says Ms Savvantidou, the cost of energy from its new plants will be around €55-60/MWh, and could rise as high as €70 if projects run over budget. EDF26sells power for about €39/MWh on average, according to Citigroup.
Mr Proglio appears to agree with EDF’s21. He told France’s parliament this month that he was unsure whether EDF should expand to America by completing the deal with Constellation. “He doesn’t want EDF to22too many hares at the same time,” says a person close to the government. Yet Mr Proglio seems to have grandiose ideas of his own. EDF’s next-generation reactor, called the EPR, is designed by Areva, another state-controlled French firm. Areva is in difficulty because the first EPR, under construction in Finland, is well behind23and far over budget. This week Mr Proglio said that EDF should take control of the bit of Areva that builds reactors. The idea is a radical one, and Areva will certainly resist it—but it indicates the uncertainty surrounding EDF’s strategy.
EDF is also facing operational troubles. France has had to import large quantities of electricity this year because almost a third of its nuclear plants went out of14at some point, eor15. France’s grid operator recently warned that the country could even suffer power16this winter. One17cause, says Sofia Savvantidou of Citigroup, an investment bank, is many years of underinvestment. As well as spending more on everyday maintenance, EDF will need to invest to extend the life of its French reactors from 40 to 60 years. A few years ago it thought the cost would be18, but now it reckons it will need to spend €400mon each plant.
The rising cost of building new nuclear plants is another worry. Higher prices for cement and steel, the complexity of building new designs for the first time and onerous safety requirements are all adding to EDF’s bills and threatening profits. “Every morning we get a new safety request,” complains one executive. The24of the nuclear supply-chain over recent decades (there is only one supplier in the world for some components) and the sudden rush by multiple governments to spur construction are also25of inflation.
Even for EDF, however, the costs are9. In 2008 it bought British Energy, a utility which owns eight nuclear plants, for £12.5 billion ($22.5 billion). Earlier this month, after a long wait for regulatory10, it concluded a 11 to buy half of the nuclear assets of Constellation Energy, an American utility, for $4.5 billion. On top of these acquisitions it plans to build11new reactors (four in Britain, four in America, two in China and one in France). It also wants to build four plants in Italy and is12to build several in the United Arab Emirates, as part of a consortium in both places. These investments will stretch the firm’s balance-sheet. Debt now stands at €37 billion ($53 billion) and could rise to €65 billion by 2017-18, according to a report from HSBC, a bank. To help13its debt, the firm plans to make disposals worth €5 billion by the end of 2010.
According to one adviser, the problems with EDF’s fleet this year show there has been “too much attention given to financing international19and not enough to the basics of running the plants at home.” Some government officials want EDF to restrict itself mainly to Europe. Such a change of strategy would doubtless please the firm’s unions, which fear that expanding abroad will encourage it to20more like a listed company and less like a government bureaucracy.
EDF has long exported its nuclear-energy expertise, but earned only advisory fees for its efforts. It helped build China’s nuclear fleet, for example, for a few million euros. Now, as growth at homeslows, it wants to make bigger5by building and6nuclear plants of its own abroad. After all, it is one of very few utilities that can7to build several reactors by itself, without sharing the risk with partners or governments. And in an industry which atrophied after accidents at Three Mile Island in America and Chernobyl in8is now Ukraine, it has relatively extensive recent experience of building and operating modern nuclear plants.