Areva - Reference Document 2016

06

BUSINESS OVERVIEW

6.1 Markets for nuclear power and renewable energies

GAS PRICE SCENARIOS

CARBON PRICE SCENARIOS

$

/ ton

2015

60

14 16 $

/ MBtu

2015

50

12

40

10

30

8

6

20

4

10

2

0

0

2015

2020

2030

2040

2015*

2020

2030

2040

Europe USA Japan

China EU28 + South Korea South Africa

Source:WEO 2016.

* For EU28. Source:WEO 2016.

A long-term view of the energy sector shows that nuclear power is a competitive source of electricity, offering stable and predictable costs. The data and results of the latest assessment of nuclear power generating costs performed jointly by the International Energy Agency and the Nuclear Energy Agency of the OECD entitled Projected Costs of Generating Electricity (2015 edition) shows varying levels of competitiveness of new nuclear projects, depending on the region: p in Europe, the total cost of new nuclear projects is comparable to that of other baseload electricity generation technologies (gas, coal); p in the United States, the prices for fossil fuels and/or carbon would have to be high to restore the competitiveness of new nuclear projects. The amount of capital expenditure (CAPEX) required for new nuclear units is very high, representing several billion dollars, and accounts for 60% or more of the cost of the kilowatt-hour. Equipment costs vary as a function of their location, as do those of labor. Such construction requires special financing, part capital and part debt. Added to the high cost of CAPEX are interest during construction and provisions for contingencies. The total cost is therefore sensitive to the interest rate contracted for the debt. For operating reactors, decisions to extend their operating period are highly dependent on market conditions and demand forecasts, in addition to social and political factors. In the United States, the Nuclear Regulatory Commission has granted permission to extend the operating life of 83 units up to 60 years. US utilities predict that fuel and maintenance costs will go down in the coming years to cope with the reduced market price for electricity. In fact, reactors operating in deregulated markets are more at risk than those that operate in regulated markets. In 2013, five reactors had already shut down in the United States due to market conditions (two in California, two in Florida and one in Wisconsin), and a dozen others are threatened with shutdown in the short term. Five reactor uprating projects have been cancelled. p in China, new nuclear projects are clearly competitive;

The State of New York, however, decided to grant financial support to nuclear power production through subsidies over a period of twelve years (six times two years) in order to meet its reduction commitments. This will avoid the shutdown of a few units. A similar plan is in progress in Illinois, and other states could adopt the same approach. In Sweden, due to the relatively low market price of electricity and despite the recent exemption of the tax on nuclear power for the operator, 4 of the 10 reactors will be closed by 2020. Nuclear power improves national security of electricity supply Another major advantage of nuclear-generated electricity lies in the security of supply it provides. Unlike hydrocarbon reserves, which are concentrated in certain regions, uranium resources are well distributed around the world. The principal proven uranium resources are located in Australia (29%), in North America (15%), in Africa (18%), in China and Mongolia (7%), in Kazakhstan (13%) and in Russia (9%), with the remaining 4% found in Eurasia ( source: Uranium 2016: Production and Demand , IAEA © OECD 2016 ). With the latest generations of reactors, nuclear power offers enhanced safety and operating performance AREVA’s line of reactors offers a range of capacities, from1,100MWe to 1,650MWe, and of technologies. These reactors meet the most recent requirements in terms of: p nuclear safety: designs that drastically reduce the possibility of a serious accident and ensure that there would be no offsite environmental consequences by maintaining containment integrity (corium catcher to confine the molten core, prevention of a hydrogen explosion or steam inside the containment building, ability to withstand a large commercial aircraft crash), as confirmed by the safety regulators’ certification and by the necessary measures to ensure continuity of cooling;

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2016 AREVA REFERENCE DOCUMENT