Areva Predicts Uranium Demand Freeze Until 2014

By Francois de Beaupuy – Apr 4, 2012 4:01 PM MT

Areva SA (AREVA), the world’s largest maker of atomic reactors, predicted the market for uranium will suffer from a glut before nuclear fuel demand rebounds from 2014 as the industry reels from last year’s meltdown in Japan.

“In two years, there will be very strong demand on the market, as new reactors start operating, and as new contracts with the existing fleet kick in,” Chief Commercial Officer Ruben Lazo said in a March 26 interview at the company’s headquarters in Paris. “I’m sure that Japan will restart a few reactors this year, and complete all necessary measures to restart many others in 2013 and 2014.”

Uranium concentrate, commonly known as yellowcake, is displayed at Kansai Electric Power Co.’s Mihama nuclear power station in Mihama town, Japan. Photographer: Tomohiro Ohsumi/Bloomberg

Luc Oursel, chief executive officer of Areva SA. Photographer: SeongJoon Cho/Bloomberg

The tsunami that wrecked the Japanese nuclear site in 2011 has weighed on Areva, whose shares have lost 58 percent of their value since the worst nuclear accident in 25 years. Japanhas idled all but one of its 54 reactors, and Germany has reversed a decision to extend the lifespan of its atomic facilities. Still, Lazo aims to double the order intake from Asia this year from more than 1 billion euros ($1.34 billion) in 2011, saying market “fundamentals” remain broadly intact.

The French company is betting that an 80 percent jump in global energy demand by 2030, combined with rising fuel prices and the need to cut greenhouse gas emissions, will lead to a 2.2 percent annual increase in the installed base of nuclear plants in the next two decades.

Energy Mix

“Responsible governments won’t tie the whole industrial and economic development of their country to a single source of energy,” Lazo said. “Manufacturers want some predictability in power prices that can’t be provided by gas, while nuclear is the only energy that can guarantee some price stability.”

The accident in Japan forced Areva to idle plants, cut jobs, write down assets and report a record 2.42 billion loss in 2011 as sales prospects for uranium ore, nuclear fuel and equipment receded. Areva, which competes with Urenco Ltd., USEC Inc. (USU) and OAO Techsnabexport on uranium enrichment, ousted its long-time chief executive officer, Anne Lauvergeon, last June, and replaced her with Luc Oursel.

Lazo said he spotted signs on a recent trip to Japan that the country won’t abandon atomic power outright. Chubu Electric Power Co. (9502), an Areva client, is spending 1 billion euros to erect a seawall to protect three nuclear reactors in Hamaoka south of Tokyo from tsunamis, he said.

Asian Growth

The executive predicts Asia will account for about 60 percent of the 300 gigawatts of global nuclear new builds by 2030. Areva, which is building a 1.6 gigawatt reactor called EPR in France, in Finland and two in China, is in “very advanced stage of talks” to sell two additional EPRs to China, which may complete its safety review this year, Lazo said. It may wrap up talks to sell two EPRs in India in 2012, he said.

Areva is also “very confident” about prospects in the U.S., where it got a $1 billion contract with the Tennessee Valley Authority (3015A) last year to help complete a nuclear plant in Alabama, Lazo said. Areva is quickening the certification of the EPR in the U.S. as it “wants to be a significant player” in new reactors in the country.

In nuclear reactor construction, “competition is becoming more aggressive as the nuclear renaissance scenario isn’t there anymore,” said Lazo. “There’s a bigger number of players aiming for the same targets.”

Finnish Reactor

In Finland, a utility for which Areva is building an EPR said March 23 that French company will face GE Hitachi Nuclear Energy, Korea Hydro & Nuclear Power Co., Mitsubishi Heavy Industries Ltd. (7011) and Toshiba Corp. (6502) in next year’s tender. In Jordan, an Areva-Mitsubishi venture is competing against Russian and Canadian rivals.

Lazo expects a final contract this year to supply two EPRs to Electricite de France’s unit in the U.K., where a group of German utilities on March 29 dropped plans for new builds. Areva is also working on tenders to be launched this year or next in countries such as Poland, South Africa, and the Czech Republic.

Prospects remain more uncertain back home in France, where Socialist presidential candidateFrancois Hollande has pledged to shut the country’s oldest atomic plant by 2017 and cut reliance on nuclear power should he get elected in May. France generates about 77 percent of its energy from nuclear power now.

“In France, we’re here to implement the energy policy of the government,” the chief salesman of state-controlled Areva said. “We’re also here to explain, clarify and provide information to decision-makers. New builds are cheaper that other sources of energy.”

To contact the reporter on this story: Francois de Beaupuy in Paris

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