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18 December 2003 - The Finnish electricity utility Teollisuuden Voima Oy (TVO) has signed today with the Areva and Siemens consortium a contract to build an EPR (European Pressurized Water Reactor) nuclear power plant at the Olkiluoto site in Finland.
The Nuclear Island for the turnkey project will be supplied by Framatome ANP, the Turbine Island by Siemens. The overall Olkiluoto 3 project cost has been estimated by TVO at around €3bn ($3.72bn)
The EPR plant for Finland has a capacity of about 1600 MW. It is scheduled to start commercial operation in 2009. The project scope segmentation includes contracting civil construction and a major part of supply and installation work to local Finnish companies (around 40 per cent). Furthermore, qualified manufacturers will participate, among them Areva's Chalon/Saint-Marcel and Jeumont plants for nuclear components in France and several Siemens plants which will supply the turbine generator set.
"The decision in favour of our advanced EPR reactor design is evidence of TVO's confidence in our consortium's expertise and recognizes Areva's long track record and full commitment to the future of nuclear power. It makes also clear that new nuclear power plants are a competitive and cost effective option to produce carbon-free base-load electricity and thus contribute to a sustainable development in the energy sector", said Anne Lauvergeon, Chairman of Areva's Executive Board.
Finish energy group Fortum said it planned to participate in the new fifth nuclear power plant unit in Finland with a share of approximately 25 per cent. Fortum's investment as an equity share will be €185m during 2004 - 2009,
entitling to approximately 400 MW of the plant's capacity. Fortum will also give a shareholders' loan of €40m to the project.
As a result of the announcement by TVO, Standard & Poor's Ratings Services said it had lowered its long-term corporate credit rating on the non-profit utility to 'BBB' from 'BBB+'. It confirmed the outlook as stable and at the same time, the short-term corporate credit and commercial paper ratings were affirmed at 'A-2'.
"The downgrade reflects an expected weakening of TVO's financial profile resulting from the gradual incurrence of about €2.5bn of additional debt until 2009, further to the current total debt outstanding of €240m," said Standard & Poor's credit analyst Magnus Pettersson. "The project will also add construction and operating risks, although these will be offset by a strong turnkey, time-certain supply contract with ample guarantees backed by strong suppliers and security bonds."
Given the electricity price development in the Nordic region the project rationale appears to be strong.
The investment will be financed by a €2bn syndicated bank loan and €500m of bilateral bank loans, and will accrue gradually.
Debt leverage is expected to peak at 65 per cent in 2009 compared with 39 per cent at Sept. 30, 2003. Shareholders will contribute about €700m in equity and €180m in shareholder loans on a pro rata basis during construction. Debt service coverage ratios are not expected to change due to the not-for-profit basis.
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