U.S. Nuclear Resurgence Draws France's Areva
"Enormous" Opportunities Await the Paris Nuclear Powerhouse
One French company is attempting an energy maneuver as tricky as the quad-axel proves for figure skaters...
Areva SA (Euronext Paris: CEI) execs say they plan to take advantage of "enormous" opportunities in a reinvigorated U.S. nuclear power market while expanding their international renewable energy portfolio with hundreds of billions in investment dollars.
Over the next few years, we'll see the pride of France's power industry pivot between nuclear, solar, wind, and other resources to gain market share in the world's biggest energy economy.
Early last week, Atlanta-based electricity Southern Company (NYSE: SO) and partners got $8.33 billion in loan guarantees to develop the first new domestic nuclear capacity in a generation. In total, Obama's 2011 budget puts up $54 billion in financing help for new nuclear power. So when Southern Co. got that vote of confidence from the Department of Energy, Areva got excited.
Radioactive Energy Makes them Feel Warm and Fuzzy
After the news of Southern's success in breaking the Washington deadlock on nuclear, Areva's U.S. CEO Jacques Besnaiou sounded like he might be ready to sing "Kumbaya" around a glowing hunk of uranium.
"For me, they are not competitors, we are competi-mates," Besnaiou told Bloomberg about other nuclear power plant builders.
That's not exactly true, of course. Otherwise, no one would want to snap up shares of Areva stock, which trades on the Pink Sheets as ARVCY. Areva will be as assertive as it needs to be in order to gain from the reawakening of the long-dormant nuclear plant construction sector in the U.S.
Areva's competitive edge here will stem from the fact that it's already the country's top supplier of nuclear energy products and services, operating from headquarters in Maryland and Virginia.
In the five-year period to 2014, Areva was set to invest $3 billion of its own money in U.S. operations — with or without federal loan guarantees.
As Nick Hodge wrote in Energy and Capital last week when this story broke, the government and the private sector are using pretty simple arithmetic to make their investment decisions:
The United States gets about 20% of its electricity from 104 nuclear reactors. So each one is producing about 0.2% of our needs.
By contrast, we get 49% of our electricity from 614 coal plants - each one generating about 0.08% of our total supply.
Easy math tells us then that nuclear plants produce twice as much power as coal plants. And with the Securities & Exchange Commission (SEC) now requiring companies to disclose their carbon risk (yes, this is a reality), the Environmental Protection Agency declaring carbon dioxide a threat to public health, and an all out ban on new coal plants in California and elsewhere... next-generation nuclear plants are becoming more and more of a no-brainer.
And so is investing in it.
Areva is Ready to Move in Any Direction
Even after hitting a regulatory hitch in its new European Pressurized Reactor line last November (the kind of next-generation nuclear plant Nick referred to above), Areva is drawing interest in that same EPR technology from investors in California's Fresno Nuclear Energy Group. Power developers there in the Golden State's Central Valley want Areva to introduce its advanced systems in California's country-sized market soon, even as Areva plans four new reactors in Italy.
Being an international firm with manufacturing facilities in 43 countries and sales in more than twice that number, Areva operates differently in different places. Most importantly, national attitudes toward the role of nuclear energy vary wildly across the globe. Finland, where the first EPR plant is being constructed, is not far from Lithuania, where the Chernobyl-era Ignalina reactor has been slated for closing for years now.
Cold War nuclear technology is still the dominant mental picture for many Americans, but in Lithuania and France, uranium has kept coal and its low rate of return off the drawing board. France gets over 79% of its electricity from Areva and national utility EDF, and Lithuanians come in second worldwide with 71% of their household juice coming from radioactive elements.
With that entrenched role for nuclear comes greater experience in dealing with waste, a hot issue everywhere. In a global emissions reduction framework, these countries can also reap the benefits of non-polluting water vapor output that nuclear plants produce, instead of the greenhouse gases their fossil fuel counterparts emit.
And there's the real crossover point for Areva: "clean energy." Nuclear power isn't renewable, and many cry that it's not green. But it is an alternative to burning fossil fuels, and we are now moving into third and fourth generation nuclear power technology.
Right now, Areva and EDF are pinning down a new deal on how spent nuclear fuel should be transported and stored. The two are contractual parties in a treatment and recycling partnership; reports carry none of the "not in my backyard" furor we hear in the U.S. press.
Areva U.S. CEO Besnainou may be jumping the gun a bit when he says, "It's no longer a taboo" to build new nuclear plants in the U.S., but the government is getting there for sure.
Yet to emphasize the affinity between their core operations and true, green renewable energy, Areva knows it needs to do more.
That's why the company is investing $500 million in solar, wind, and biomass energy in the U.S.
Adage, Areva's joint venture in biomass with Duke Energy, just announced its first 55 MW power plant in Washington state. Timber biomass will be fed into the $250 million facility, and the product will be enough power for 40,000 homes.
As for wind, Areva sold its minority stake in German wind power company RePower to India's Suzlon in 2008 for 350 million euros, but that wasn't the French bow out of the sector. The French firm's Maryland offices got a DOE grant in mid-2009 to study how the U.S. electrical grid should prepare for a surge in wind energy capacity before 2030. So even if it's from the standpoint of grid management, Areva is involved with the American wind power rollout.
Then early this February, Areva bought solar power company Ausra, which is based in Google's hometown of Mountain View, California. Ausra makes solar power products most consumers haven't heard of yet. Ausra's — and now Areva's — main skill is in creating steam with the sun's rays. This is called Concentrating (or concentrated) Solar Power, and it's the core of several utility-scale solar power projects in the works from the U.S. desert Southwest to North Africa.
North Africa is where I have my eye set for later this spring. I'll be in Morocco to check out plans for a trans-Mediterranean renewable energy grid called Desertec. I've been tracking this story for years, and now several German companies as well as Areva and EDF are expressing their desire to make the ambitious project a reality.
And Desertec is not the first pie-in-the-sky desert power idea to have drawn big money in recent years.
If Obama's nuclear money infusion has taught us one thing, it's to expect the unexpected.
The Best Free Investment You'll Ever Make
After getting your report, you’ll begin receiving the Wealth Daily e-Letter, delivered to your inbox daily.