(576.5454) WISE Amsterdam - The French state-owned company EdF is the world's largest nuclear utility, with subsidiaries all over the world: Argentina, Brazil, China, Europe, the U.S. and elsewhere. Its financial problems therefore have worldwide implications.
EdF's annual accounts for 2001 were released a few months ago. At the time, it was already clear that EdF had gotten into serious problems with its foreign subsidiaries, which together lost 1.392 billion Euros (US$1.37 billion) in 2001. Yet up until recently, its core business of generating electricity - mostly nuclear - in France was thought to be unaffected. However, recent scrutiny by a French MP, Yvelines Masdeu-Arus, has shown that EdF's financial problems are not limited to its subsidiaries.
Masdeu-Arus pointed out that the financial situation of EdF has deteriorated continually over a number of years, and has calculated that the net value of the EdF Group has declined by over 11 billion Euros (just under US$11 billion) between 1998 and 2001.
EdF has recently been on a shopping spree, buying businesses all over the world. When the French electricity market is opened to competition, EdF hopes to use profits from these foreign subsidiaries to offset any losses in France. These foreign subsidiaries, notably those in Argentina and Brazil, have now themselves produced losses (just as they did for Enron, which pursued a similar strategy.)
Worse still, EdF has used its nuclear decommissioning funds to buy up these subsidiaries. Masdeu-Arus pointed out that while the accounts include a 27-billion-Euro provision for decommissioning, only 1.585 billion Euro of this is in a dedicated fund, the rest being "no more than an accounting classification". Indeed, the European Commission has singled France out for criticism over the inadequacy of EdF's decommissioning funds (see "Nuclear waste 'Euro-dumps'?" in this WISE/NIRS Nuclear Monitor).
Another worrying tendency is that EdF, like British Energy, seems to be facing a cash crunch. The EdF Group's total cash reserves have dropped by 55% in 2001, from 4.761 to 2.123 billion Euros (US$4.7 billion to US$2.09 billion).
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This "cash crunch" is unlikely to lead to financial problems like those of British Energy since unlike British Energy, EdF benefits from a guarantee from the French Government. However, the European Commission has declared this guarantee to be illegal state aid, and has demanded that EdF repay 900 million Euros to the French government (see box "Illegal aid for EdF" in WISE/NIRS Nuclear Monitor 575.5452, "British Energy's financial problems continue").
Nuclear "on the cheap"
In a liberalized energy market, utilities may try to produce "cheap" nuclear electricity by saving money on essential items such as provisions for decommissioning the reactors. EdF, it seems, has tried this strategy even before the French electricity market is liberalized - which raises the question: where will they make extra savings once the market is liberalized?
EdF's financial problems are also ironic because the French strategy of "mass-production" of nuclear reactors was intended to keep the price down. French nuclear electricity has been sold cheaply all over Europe, giving the impression that nuclear power can be cheap if produced on a large enough scale. In fact, excess French nuclear electricity has often been "dumped" on the rest of Europe - sold at a loss of perhaps a billion dollars per year (see WISE News Communique 456.4523, "Losses on French electricity exports").
Yet, when the nuclear lobby in the U.S. or U.K. talks of building new reactors, it sometimes uses the French example to claim that if several reactors - perhaps ten - were built at the same time, nuclear power would be cost-competitive. EdF's current financial problems show that this is a dubious claim. Indeed, mass-produced reactor designs have their own special problem: mass-produced design flaws.
Earthquake risk
The latest of these "mass-produced design flaws" affect a staggering 34 of France's 58 reactors. There are in fact two separate flaws, both of which affect the reactors' safe operation if an earthquake occurs. One of the flaws affects auxiliary cooling water tanks that supply the reactor with cooling water in case of an emergency. The other design flaw affects the remote control mechanisms of certain valves (for valves in areas of very high radioactivity, remote control mechanisms are essential.)
Both design flaws were classed as level 1 on the 7-level International Nuclear Event Scale (INES). However, given that all 34 reactors have been operating for their entire lifetime with components that could fail if an earthquake had occurred, this Level 1 rating fails to reflect the seriousness of the issue.
The problem was also put into focus by recent earthquakes in Italy and Brittany. Fortunately, both of these occurred in areas where there are no nuclear power stations. Italy closed all its nuclear power stations down after the Chernobyl accident, and the French authorities gave up plans to build reactors in Brittany after local opposition (see WISE News Communique 499/500, the "Victory Special", for more details).
Previous "generic" design faults in France include faults in the containment buildings (see WISE News Communique 487.4832, "Generic problems at EDF NPP?") and problems with various kinds of piping (see WISE News Communique 507.4986, "New delays for plagued French N-4 Series"). Also, large numbers of cracks continue to be detected in French reactors (see WISE/NIRS Nuclear Monitor 568.5402, "Large numbers of undetected cracks in the world's PWR's").
Sources:
- WISE-Paris news releases, 28 October 2002
- EdF annual accounts for 2001
- Réseau "Sortir du nucléaire" press release, 4 November 2002
Contact: Réseau "Sortir du nucléaire", 9, rue Dumenge, 69004 Lyon, France
Tel: +33 4 78 28 29 22. Fax: +33 4 72 07 70 04
E-mail rezo@sortirdunucleaire.org
Web www.sortirdunucleaire.org
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