Lesson in how not to go nuclear

As the UAE prepares to adopt nuclear energy, it can draw pointers from Finland's troubled Olkiluoto plant. What should have been a relatively low-cost and swiftly built project is late, over budget and mired in disputes. Chris Stanton reports Finland's new nuclear plant at Olkiluoto should have been generating revenue and a major slice of the country's electricity by now. Instead, the project has become a multibillion-euro money pit that serves as a cautionary tale for incoming members of the nuclear energy club, including the UAE.

In 2005, Finland broke ground on the world's most advanced reactor, a 1,600-megawatt plant built by Areva of France and the German firm Siemens. The nuclear industry hoped it would be an example of a new generation of plants that were cheap and efficient and could be built faster than older models. Four and a half years later, the project is running at least three years late, costs have doubled and both sides are locked in an ugly legal battle that spilled out in public several times last year.

The Olkiluoto fiasco loomed large in the selection process for the UAE's own nuclear power programme, which culminated in awarding a US$20 billion (Dh73.46bn) contract to a group of Korean firms last month over a rival bid from a French consortium that included Areva. Government officials said a key factor in the decision was the Korean team's demonstrated ability to build reactors on schedule. The UAE is likely to benefit in a number of ways from the Olkiluoto example, not least because it will have easier access to components from firms that have reactivated production lines after almost a decade of dormancy.

And the lessons learnt on the need for better planning, oversight of subcontractors and improved ties between the regulator and contractor have been spelt out for all to see. As Olkiluoto was the first in a line of new reactors, the project's delays and challenges should have been expected, says Lawrence Poole, an energy analyst at IHS Global Insight. "It's supposed to be the flagship reactor; it's supposed to showcase the technology," Mr Poole says. "Despite the best intentions, these things tend to come a lot later than planned."

Challenges at Olkiluoto, Finland's fifth nuclear reactor, began only a month after Areva and Siemens started construction in September 2005, when officials admitted the project was already six months behind schedule. The contractors failed to complete "detailed civil engineering and design", says Kathe Sarparanta, a spokeswoman for TVO, the Finnish utility. Areva has said its planning was held back by cumbersome regulation from STUK, the Finnish regulator. When contractors began pouring a concrete base slab for the reactor, regulators stepped in, noting the concrete was more porous than specifications allowed. Work was halted as STUK opened an investigation.

Officials later traced the problem to an excessive injection of water at the cement plant, but the dispute over the foundations of the reactor continues today and is a key issue to be decided in arbitration. Further conflicts over welding and the standards of procured equipment followed. Areva complained that over the long period in which few reactors were built worldwide, high-quality parts had become more difficult to obtain.

TVO agrees that the plant's timing was a key reason for the delay, Ms Sarparanta says. "It was more than 20 years since the last nuclear power plants were constructed in western Europe," she says. "Thus it took a longer time than expected for the industry [suppliers or subcontractors] to reach the level in their administration, for example quality control management, that was required in the nuclear business.

"There are more than 2,400 companies involved in the project." The completion date was pushed back by one year, then 18 months, then three years. At the same time, Areva officials said, STUK was again slowing the construction process. Costs mounted. In March of last year, Areva revealed that the project was ?1.7bn (Dh8.92bn) over its initial budget of ?3.3bn, and the start of power production was delayed from May of this year to 2012 at the earliest. Anne Lauvergeon, the chief executive of Areva, said the company had "zero tolerance" for further delays. The initial delays had stemmed in part from TVO, she said.

At its August earnings announcement for the first half of last year, Areva said it had put aside an extra ?550 million provision for delays at the site. That provision nalmost erased profits for the first half. Since the reactor contract is fixed-price, Areva cannot raise prices to make up for the delays. The company is expected to lose billions of euros on the project, which it is hoping to recover through its legal claims against TVO. The claims are now under arbitration.

Areva officials cited "inadequate resources deployed by TVO to fulfil their contractual commitments" and suggested they might halt work on the reactor this September. "Areva will only commence the final phases of the construction when TVO has agreed upon the proposals that have been made," the firm said. TVO chiefs offer a different version: Areva and its former partner, Siemens, demonstrated "gross negligence" at nearly every step of the project, from a lack of initial planning to poor construction of the foundations to faulty welding on the reactor containment vessel.

In July, Professor Jukka Laaksonen, the director general of STUK, said the French had failed to prepare adequately for the rigorous Finnish regulatory system. "They started planning when they won the contract, which was of course too late. They should have used two years for planning [in advance]," Prof Laaksonen told Agence France-Presse. "The French did not understand at first the Finnish system, that no important device can be built before the plan is approved."

Each side has billions of euros at stake, but to the outside observer, both have good arguments. The French have said publicly that they did not anticipate the highly involved regulatory process used by the Finns, while STUK hasn't supervised construction of a reactor the country's first one in the 1970s. "I don't think the regulatory processes were necessarily there to support it," Mr Poole says.

"They've had issues with a culture clash. The Areva consortium was perhaps not as forthcoming as it should have been about its safety standards." The initial hope that the project would be completed in a record four years was also misplaced, Mr Poole says. Many of the lessons of Olkiluoto have not been lost on Abu Dhabi. The Government has moved to create a strong regulator, led by a former chief of the US nuclear regulatory commission.

The Federal Authority for Nuclear Regulation must approve a licence for the Emirates Nuclear Energy Corporation (ENEC) to begin construction. ENEC said this month it would submit an application this year and hoped to break ground in 2012. The stakes are clear to everyone involved. As the Government ventures into critical technology with no experience in the field, it will do all it can to steer its contractors away from the radioactive example of Olkiluoto.

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