Interview with Anne Lauvergeon, CEO of Areva.
Described by Forbes magazine as one of the 10 most powerful women in the world, Anne Lauvergeon (51), also known by her nickname of Atomic Annie, is the head of French nuclear giant Areva (48,000 employees, €8.5 billion in revenues), which is slated to supply India with six “Third Generation” nuclear reactors, each capable of producing 1,600 megawatts of electricity. A graduate of the prestigious Ecole Normale Superieure, Ms Lauvergeon holds a doctorate in Physics and in the 1990s served as a close personal adviser to President Mitterrand. She spoke to TheHindu's Vaiju Naravane in Paris.
What stage of the negotiations are you at? Are you sure of being able to ink the final accord during President Sarkozy's visit to India in early December?
In early 2009 we signed a Memorandum of Understanding for two EPRs (European Pressurised Reactor), the first of a series of six plus the fuel cycle — 10,000 megawatts in all, the fuel cycle to run for 20 years, manufacturing technology and capability, the access to investments uranium mining and enrichment. Our offer is the most competitive we have ever made. We have organised scope sharing — the division of responsibilities and tasks between us and NPCIL (Nuclear Power Corporation of India Limited) and we are now at the final stage of these negotiations. We still need some elements from the site in terms of seismology, site-specific studies and so on but that will be filled in later on.
Has the EPR project been submitted to the Atomic Energy Regulatory Board (AERB) for its green light?
That's for the NPCIL to do, not for us.
So are you confident of being able to sign something during President Sarkozy's visit?
It doesn't depend on me anymore but it depends on the Indian will to make it happen.
How much is each reactor going to cost India and what will be the unit cost of electricity per Kw/hour?
You have a system in India which is very important: all the sources of electricity have to have a maximum basic cost below four rupees per kilowatt hour. We are below that. Maybe that's the best answer.
You mean the detailed costing is not done yet?
It is done. We are below the Rs.4 figure but I am not going to give you the details.
The cost of the reactor has been fluctuating between €3 billion and €5 billion, both in the case of OL3 of Finland and Flamanville-3 in France …
No. We are around three billion in China. You know giving out the price depends on the customer. It is not for me to give the price if the customer does not want to give it. But it is enough to say that we are within Indian constraints, that is, below four rupees per kilowatt hour.
Have you fully identified the Indian players who are going to be involved in the construction? What percentage of the work force will be Indian?
NPCIL knows the different possible suppliers very well. They have already chosen some and they will be issuing bids for some others. For our part, we have identified a lot of different companies. We have created a joint venture with Bharat Forge for forgings and heavy components to manufacture them in India for the Indian market but also for export. What we would like to do ourselves is to create an Indian base for India and for the rest of the world. We have done the same thing for engineering, with Tata and others. The idea is to create a supply chain for India and for the rest of the world. A lot of jobs are involved. The construction of an EPR reactor calls for 5,000 people.
How much of a problem does the Nuclear Liability Act pose?
It is a highly political issue in India and we understand its sensitivity. That said, when we sell a nuclear island, it is clear that we guarantee the system for the next 10 years. The operator, by definition, is responsible. In 20 or 30 years from now you could imagine that the operator has changed some parts, used spares. So for the supplier to be held responsible for everything when everything in the plant is not supplied by him is a bit difficult.
But what kind of margin of manoeuvre do you have? Are you seeking exemptions from the law?
We are not only a supplier, we are also a partner. And when I speak of the delivery of the fuel cycle during 20 years, of a lifetime guarantee for uranium supply, etc., it also means that we are not going to be a supplier that disappears once the equipment is sold. We are partners over the long haul in this domain and we have to understand each other in the right way. Maybe I am too confident. But we feel this question is manageable. We must not exaggerate the liability issue.
I would like to look at the contentious issues Areva has had to face. The cost of the Finnish reactor has gone up from €3 to €5 billion … There were huge delays in construction. So did you make a mistake by signing for a turnkey project?
That was a pre-requisite dictated by TVO of Finland. Also it was the first of its kind and the only possibility of building a third generation reactor in Europe. We were competing against General Electric and the Russians who had accepted the conditions. Look, we could have some regrets about the decision which has been painful for us. But we now have a demonstrator, unique in the world. I am sure we would never have signed an agreement with the Chinese and now with the Indians had we not had this Finnish reactor to show. Before buying something, people need to see the product. There are a lot of designs which are perfect on paper but which do not work. When it is visited by customers the OL3 is the best advertisement we could have.
The EPR technology appears to be running into difficulties with the certification process in the U.S. and the U.K. What was the nub of the problems with the Finns? They are now taking you to court, you've gone into arbitration and there is big money involved.
This is the only customer with whom we have that kind of a dispute. It's not our culture. This reactor was the first nuclear plant in Finland for 25 years, so we had to re-start the supply chain. In our contract they had three months to send documents to the nuclear safety regulator and come back to us with clarifications. On an average they took a year and that is the reason we are in arbitration.
How has that affected your balance sheet?
We have had to make budgetary provisions for these losses which amount to €2.7 billion. We have already paid and if we win the arbitration that will come as profit!
Areva claims that the TVO reactor in Finland was a learning curve. But it now turns out that the EPR reactor Flamanville-3 in France where construction started in 2007 is also grossly over budget and delayed. So what is the problem there?
We are not late in Flamanville-3. Our part of the work is on time. It is the operator, EDF who is late with the civil work. The company doing it is the same that worked on the Finnish site [the reference is to French construction giant Bouygues.] We ourselves are perfectly on time.
But discussions with the Nuclear Safety Authority (ASN) indicate that there are unresolved issues related to safety and quality both. There are welding problems on the inner steel lining for instance …
But we are not responsible for that. All we are supplying in Flamanville-3 is the nuclear core of the reactor and not the concrete work, the steel lining or the civil works. What is interesting to see is that we too had a lot of problems with the civil works in Finland. EDF did not want to be too involved in OL3 so they did not learn the lessons there. In China there is no problem.
The ASN also pointed out that they have still not received full and satisfactory answers to queries raised about the safety features in this reactor, especially the Instrumentation and Control (I&C) systems.
Yes, but the I&C is not on the critical path. This is a case of the digital versus the analog. We designed the EPR with a digital system. But the safety authorities which tend to be more conservative, asked if these new systems were as safe as the analog ones.
Today the architecture of the I&C has been approved by Finland's STUK. In Britain, the Health and Safety Executive (HSE) says it has moved forward but it needs more work and in France we are expecting a final answer at the end of this year. Unfortunately, the three systems are all going to be different.