Atoms for the Future 2011

Transcription

1 Atoms for the Future 2011

2 Fuel Cycle Front End : strategic, economic and political considerations Georges CAPUS V.P. Front-End Marketing ENSTA - Paris, November 9th, 2011 Atoms for the Future 2011

3 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4. Front-end (geo)-political dimensions 5. Conclusion: mastering the Front-end is a must Atoms for the Future G.CAPUS

4 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4.Front-end (geo)-political dimensions 5.Conclusion: mastering the Front-end is a must Atoms for the Future G.CAPUS

5 Place of the Front-End in the Nuclear Fuel Cycle BACK-END FRONT-END Used Fuel Storage The steps before power production NPP OPERATION Atoms for the Future G.CAPUS

6 Front-End Markets Most frequent purchasing mode: a segmented procurement of products & services! Products NatU3O8 concentrates NatUF6 Enriched UF6 Services Conversion Enrichment (SWUs) Commodity like Markets (published prices, +- fungible ) Fuel Assemblies Fabrication Performance? Back-end Design & engineering Reload batch optimisation Atoms for the Future G.CAPUS

7 The Front-end in practical The nuclear fuel cycle Front-end consists in all the industrial activities and related supply chain enabling the delivery of fissile material under the form of nuclear fuel assemblies which are the key component of the reactor core Atoms for the Future G.CAPUS

8 Basics: What is nuclear fuel? How does it work? Fuel constitutes the core of the reactor, where Fissile material produces heat which is transferred to the coolant It acts as the first safety barrier against radioisotopes leaks Fuel Rod m high Zr Tube Cladding Water 290 C UO2 Pellet 900 C Water Fuel pellet mm Zirconium Tube Cladding Pressurized Water Reactor Fuel Assembly Helium gap Atoms for the Future G.CAPUS

9 Basics: What is nuclear fuel? How does it work? Atrium TM Fuel Assembly for Boiling Water Reactor To produce and transmit nuclear heat in a safe and competitive way, nuclear fuel must Maintain assembly geometry during use and after (Design & Engineering) Minimize pressure-drop from coolant flow (Grids) Maximize heat exchange between fuel rods and coolant (Grids) Stop debris (Bottom nozzles) Ensure safe handling (Fuel field services) Fuel design requires ad hoc technical knowhow, a full knowledge of the customer s reactor and a sufficient understanding and of its environment. Atoms for the Future G.CAPUS

10 Basics: the nuclear fuel assembly fabrication v.s. Front-End Fuel is not a commodity: highly engineered product which needs to be qualified as part of the reactor core There is no universal fuel Fuel batches are tailor made for each reactor / reload 600 AREVA engineers worldwide are working on product design, manufacturing & performance for over 100 reloads every year. Time to market for new products is 10 to 15 years Sufficient return on experience from a broad range of operational environments Outage: fuel reload Mastery of very different fields of engineering neutronics, thermal hydraulics, thermal mechanics, mechanics, Local design teams must work very closely with customers to take into account specific operational requirements safety authorities in support to for licensing Customer cooperation is needed for in-reactor experience and licensing of lead test assemblies Core loading pattern Fuel reliability is key for the operator and a commonly-shared goal. Atoms for the Future G.CAPUS

11 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4.Front-end (geo)-political dimensions 5.Conclusion: mastering the Front-end is a must Atoms for the Future G.CAPUS

12 You said Strategic? «Strategic» is basically from the military vocabulary. When applied to raw materials or industrial activities for non military uses, it means Vital for the economic activity of a country or region Critical to achieve & protect the country or region independence from external political pressure & threats ENERGY PRODUCTION IS STRATEGIC THUS FRONT- END AS WELL WHERE NUCLEAR POWER IS KEY Atoms for the Future G.CAPUS

13 Where & When Nuclear Power is key: Fleet Capacity Trend and Forecast* Current Installed Base : 1/3 EU ; 1/3 North America ;1/3 RoW Future growth; mostly Asia, China in particular (follows GDP) others CIS Asia North America EU(27) current * WNA.Reference GWe (net) Atoms for the Future G.CAPUS

14 Front-End Self Sufficiency Ratios* Current situation reflects various strategic approaches 6 * Capacity /needs 5 4 CIS 3 Huge excess 2 Sufficiency + CHINA N Amer EU27 1 Dependance Other Asia 0 Uranium prod/requ. UF6 capa/requ. SWU LWR Powder LWR Assembly Atoms for the Future G.CAPUS

15 You said Strategic? Company level approaches. For the corporations which are part of the Nuclear Industry, securing their Front-End is increasingly STRATEGIC if they are Acting under a National Policy for Nuclear fuel security of supply Willing to sell reactors abroad as Original Equipment Manufacturers along with secured first cores and reloads Willing to differentiate in providing enhanced security of supply to their nuclear fuel customers for the long term Or if they are based upon large national uranium resources and want/must maximize the national added value related to uranium exports Atoms for the Future G.CAPUS

16 Front-End Industries & Market Trends; reasons for strategic moves 4 distinct markets supplied by a variety of actors Specific market functioning characteristics However all segments tend to become increasingly «nuclear» (safety, environment, non-proliferation) and integrated Natural U3O8 Concentrates Uranium Miners 1 Initially «not really nuclear» Convertors (Chemistry) Uranium Enrichers Conversion 2 Enrichment 3 Fabrication UF6 (natural) Since the origin «very nuclear» UF6 (enriched) 4 Fuel Fabricators (Reactor suppliers or Techno. licensee) Atoms for the Future G.CAPUS

17 Major competitors in NF Cycle & Front-End Strategies Key drivers to vertical integration? Reactors, U AdVal Cameco UEC USEC KAP AREVA BNG/ BNFL RTZ AEP GEH Toshiba/ BHP-Bill Honeywell WELCO Paladin KEPCO CNNC.. NatU w/kap CNNC UF6 Conv Proj CCO SFL CNNC SWU GLE 24% IEC %? GLE 51% ACP? CNNC React & Serv Prod élec 10% in TWelc Fab Zircatec KNFC CNNC MOX SF Treat -ment Atoms for the Future G.CAPUS

18 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4.Front-end (geo)-political dimensions 5.Conclusion: mastering the Front-end is a must Atoms for the Future G.CAPUS

19 Generating Cost* of Nuclear Electricity; Fuel cycle share At current conditions about 9-10 US$/MWh back-end included FC share in the total is highly dependant upon discount rates Fuel Cycle = 9% to 16% for discount rates 10 to 5%/y ; up to 25-35% for amortized NPPs o/w 6-7 $ (64% to 75%) for Front-End CAPEX O&M Fuel * lifecycle cost of electricity, levelised over the whole plant operation life (LCOE) Source: Projected costs of generating electricity; IEA- OECD Latest Assessment (2010) Atoms for the Future G.CAPUS

20 A paradox? In a fuel assembly cost, the commodity outweighs the technology Near 1,1 M$ per PWR assembly (0.78 M at 1.4 US$/ ) O/W 87% for the fissile material (EUP «commodity») against 13% for the technology (fabrication services) & nearly 50% for the NatU component (concentrates + conversion) *** Fabrication 13% URANIUM 46% SWU 36% UF6 Conversion 5% Exemple: FA - PWR 900 MWe (17 x 17) containing 462 kgue at 4.2% U235; tails assay 0.25% Uranium at 50 $/lbu3o8; conversion at 13 $/lbu3o8; SWU at 135$ Fabrication at 300$/kgHM (US market conditions) Burnup 48 GWd/t (th) = 6.23 US$/MWh (elec) = Atoms for the Future G.CAPUS

21 Front-End Prices: commodities v.s. non-commodities Capital intensive + highly regulated industries don t like high price volatility & unpredictability Speculators find their profit in price volatility Uranium: typically 80 to 90% of deliveries are under long term contracts, not spot Conversion (UF6 only): typically more than 90% is delivered under multi-annual contracts SWUs: typically more than 95% is delivered under long term contracts Fuel fabrication: this segment has no market indicators However a significant portion of long term contracts have market related pricing mechanism Atoms for the Future G.CAPUS

22 Front-End Spot Indicators Trend Differences in volatility reflect different market drivers & (maybe?) spot volume influence 350% base 100 Jan % 250% 200% 150% 100% lbu3o8 (bse100jan10) kgconv(bse100jan10) SWU(bse100Jan10) 50% 0% janv-00 janv-01 janv-02 janv-03 janv-04 janv-05 janv-06 janv-07 janv-08 janv-09 janv-10 janv-11 Atoms for the Future G.CAPUS

23 Front-end price trend, economics & strategic decisions While marginal in quantities, the spot indicators are revealing & amplifying market fundamental impacts through their long range trends Many investments decisions where triggered by market price trends ( example of the Junior uranium rush in ) Lengthy periods of depressed prices also lead to project delays and shutdowns or prevent timely investments required to replace old facilities While not the largest component of the NPP Life Cycle cost, Front-end is absolutely needed & LT security of supply is definitely strategic (Huge capex at stake) Atoms for the Future G.CAPUS

24 Economically Driven Secondary Supplies A Nuclear Fuel Cycle specificity amongst other energy fuels CLASSIFIED - Atoms from the past seek for a position as atoms for the future; if Recycling potential from SF RepU SF Pu Recovery of enrichment tails interested cal 01.

25 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4.Front-end (geo)-political dimensions 5.Conclusion: mastering the Front-end is a must Atoms for the Future G.CAPUS

26 Political decisions & reassessment following Fukushima events: Most countries have not rushed decisions Nuclear program / projects confirmed New Build program frozen / construction halted Decision to gradually exit nuclear power/ New Build program cancelled Atoms for the Future G.CAPUS

27 Uranium: most obvious geopolitical issue Two countries with currently no nuclear power gather 40% of total resources* U Resources 2010* ROW 35% China 3% other Asia 2% 88% of needs North America 16% EU27 1% Africa 15% 78% of World Resources / 12% of the needs CIS 28% * NEA-IAEA Identified Resources 2009 Atoms for the Future G.CAPUS

28 Addressing Front-End (Geo) Political Dimensions Increased risk implies increased cost Resource access Cost «Technical» Production cost Strategic stockpiles build-up Free Trade hurdles Resource ownership limitation Transport hurdles Long Term contracts Spot &ST contracts Bilateraly priviledged access to resources (geopolitical alliances) Fights for Resource Geopolitical risk Atoms for the Future G.CAPUS

29 Politically Driven Secondary Supplies (Again) a Nuclear Fuel Cycle specificity amongst other energy fuels USA HEU Russia WGPU >> Questions: How much? Where? When? How? In any case it does have a market impact

30 Example of strategic investment to access uranium 25 Oct 2011; Kiriyenko Tells Investors Russia Plans To Strengthen Overseas Presence Demand for Russian nuclear power plants has remained strong despite the Fukushima-Daiichi accident in March 2011 and Russia is now looking to strengthen its international presence further. Our goal is to open up the sector to broad, free dialogue with the western investment community, he said. He said Rosatom s acquisition of a majority stake in Canada-based Uranium One was a vital step towards this goal. The deal saw ARMZ pay Uranium One about 600 million US dollars (430 million euro) in cash, plus a 50 percent interest in the Akbastau uranium mine and a percent interest in the Zarechnoye mine, both in southern Kazakhstan. Quotes from NucNet news Atoms for the Future G.CAPUS

31 UF6 Conversion challenges: Regions of growth require investment Ageing plants require investment CIS 11% EU27 34% UF6 Requirements 2010 Africa 1% ROW 1% China 4% other Asia 18% North America 31% & Production Capacity 23% 29% CMXII China 5% 0% 43% Atoms for the Future G.CAPUS

32 Challenges in U enrichment Obviously needed capacity adjustments underway Huge investments required SWU Requirements 2010 & Production Capacity* CIS 11% EU27 33% Africa 1% ROW 1% China 4% other Asia 18% North America 32% ROW 0% 46% China 2% * Operable capacity other Asia 0% North America 12% 40% Atoms for the Future G.CAPUS

33 Trend in LWR Fuel Fabrication Market Current Global Fuel Fabrication Capacity is significantly exceeding requirements Total current capacities around t Demand Scenarios Source WNA Atoms for the Future G.CAPUS

34 Contents 1. Introduction: place & key role of the front-end 2. Why the front-end is strategic? 3. Front-end economic aspects now and in the future 4.Front-end (geo)-political dimensions 5.Conclusion: mastering the Front-end is a must >> What AREVA currently does to achieve that? Atoms for the Future G.CAPUS

35 AREVA Key Mining Projects AREVA is starting now to prepare the future (meaning costs and risks ) Large mining project Capex are in the range of 0.5 to >1 billion euros Imouraren Mine operator: AREVA Shareholders: AREVA (57%), State of Niger (33%), KEPCO (10%) Resources: tu Planned production (1) : 5,000 tu / yr Investment (1) : > 1Bn April 2006: Project launched May 2008: Feasibility study completed 2011: Start of construction 2014: Start of production Katco Mine operator: KATCO Shareholders: AREVA (51%), Kazatomprom (49%) Resources: 54,400 tu Planned production (1) : 4,000 tu / yr Investment (1) : > 400M April 2004: Start of commercial production after 3 years of pilot operations 2010: Production of 3,354 tu 2012: Production capacity of 4,000 tu Trekkopje Cigar Lake Mine operator: AREVA Shareholder: AREVA (100%) Resources: 42,324 MTU Planned production (1) : 3,000 tu / yr Investment (1) : > 700M July 2007: UraMin acquisition April 2008: Feasibility study complete End of 2008: Start of construction 2013: Start of production Mine operator: Cameco Shareholders: Cameco (50%), AREVA (37%), third parties Resources: 135,000 tu Planned production (1) : 7,000 tu / yr Investment (1) :: > 1 Bn 2010: Dewatering completed 2013: Start of production Note: (1) Production and Capex figures are 100% basis Atoms for the Future G.CAPUS

36 The COMURHEX II project AREVA is the first to invest in a brand new conversion facility In France Investment: > 600M COMURHEX II Extendable Capacity: 15,000 tu per year, extensible to 21,000 tu only with market support Pierrelatte Malvési Start of Construction: 2009 Gradual start-up of units: Nominal Capacity: 2015 Built on existing conversion sites, with good public acceptance. Adjacent to a large enrichment facility, in the heart of Europe, the world s largest enrichment market. COMURHEX II: the most modern conversion facility that will secure supply for our customers and partners over the next 40 years, in conformance to latest safety and environmental standards. Atoms for the Future G.CAPUS

37 GEORGES BESSE II AREVA is renewing and diversifying* its capacities 1) In France Investment: 3B GEORGES BESSE II Capacity: 7.5 million SWU/y expandable to 11 MSWU UF6 introduction in the plant: December 2010 Pierrelatte Beginning of commercial production: April 2011 * Two units: North & South, 1 in production, 1 in construction Atoms for the Future G.CAPUS Nominal capacity reached by 2016 A fruitful partnership through the entrance of different utilities 5% 2.5% 2.5% 1% Tohoku & 1% Kyushu Long term security of supply implies access to the right technology (50 times less power/swu) at the right place (skills, acceptance )

38 Eagle Rock: An Enrichment Facility for the US market 2) In US Eagle Rock Investment: 2.5 Billion $ Idaho Falls Capacity: 3.2 million SWU/y expandable to 6.6 MSWU Ramp-up production capacity: Full production capacity in 2018 A proven and reliable centrifuge technology, already licensed by the NRC (same centrifuge technology as GBII in France) Centrifuge Assembly Building Separation Building Modules UF6 Buildings $2 billion loan guarantee awarded from DOE. Evaluation criteria: reliability of the proposed technology, innovation and financial strength Construction will begin in 2012 subject to licensing, Operation Support Building Technical Support Building Blending, Sampling and Preparation Building Atoms for the Future G.CAPUS

39 Fuel Manufacturing Optimization of our fuel footprint while focusing on excellence The largest fuel manufacturing capacity worldwide distributed across 15 sites requires consolidation Consolidation of US fuel fabrication in Richland, WA Over $130M to modernize the Romans Fuel Manufacturing plant (France) Targeted licensed capacities: 1800 t of Powder, 1400 t of Fuel Assemblies Over $130M to develop the Zirconium industrial tool, Joint venture with MHI (MNF), plus acquisition of 1/3 stake in Zirco Products (Japan) Increased capacity ( 7500 km), reliability and throughput on main production facilities Atoms for the Future G.CAPUS

40 Customer relationship 3 engagements for the customer needs Equity partnerships Equity interest in enrichment GBII Long-Term Contracts: secured by current facilities extended through various projects: Imouraren, COMURHEX II, GBII, EREF AREVA s fuel cycle solution - the right combination of Mining, Conversion, Enrichment & Fuel to meet customers need Integrated offer JV in mining (Niger) MITSUBISHI JV in fuel and exploration JV in mining (Niger) Deeper customer relationships for a reliable Security of Supply Atoms for the Future G.CAPUS

41 Sustainable development approach Focus on Mining Business Unit May 2011, AREVA officially became a member of ICMM On purpose dedicated customer meetings March 2011, COMINAK obtained certification for its integrated environmental management system (ISO 14001) and for its health and safety procedures (OHSAS 18001) following an audit Atoms for the Future G.CAPUS

42 Conclusion Wherever nuclear power is key (large fleet, significant contribution to electricity production, now and in the future Front-End is strategic and must be addressed as such => Allow access to uranium => Timely invest in modern facilities => Localization of fuel fabrication close to the NPP fleet => Safe and Socially Responsible operations Atoms for the Future G.CAPUS

43 Thank you for your attention! Questions? More information available on our website: areva.com Atoms for the Future G.CAPUS