Armand Laferrère: Global Trends in the Nuclear Industry, Part II

From notes for remarks by Armand Laferrère, President and CEO of AREVA Canada, to the C.D. Howe Roundtable Luncheon, April 15, 2009 Part I

It is not enough, however, to consolidate existing resources. We must also prepare the future, by hiring the right people and by organising a strong global supply chain.
Crisis or no crisis, AREVA needs the best people available to deliver the best products and services to our customers. In 2008, AREVA hired 12,000 new recruits globally. We have now, however, decided a recruitment pause. Sorry for the latecomers.
 
At the same time, we invested massively in the supply chain. In some cases, this was done through acquisitions. Two years ago, AREVA purchased Sfarsteel, one of two companies on Earth that can deliver very large, nuclear quality forgings. Sometimes also, we expanded capacities or created new factories, as I have mentioned before.
 
But in other cases yet, we chose to build long-term, strategic partnerships in order to ensure future deliveries. Let me give you a few examples of these partnerships. For convenience, I will limit myself to the news of the last six months.
 
Last October, AREVA partnered with Northrop-Grumman to build new manufacturing capacities for heavy components in Newport News, Virginia. This will be the first new nuclear manufacturing factory in North America in four decades.
 
One month later, last November, AREVA signed an agreement with Japan Steel and Works – the second company (with Sfarsteel) which knows how to produce the largest forgings of the quality required for nuclear components. JSW will give AREVA enough forging manufacturing slots for six nuclear plants each year from 2012 to 2020. We
were the first non-Japanese company ever to be invited to take a share in JSW’s capital.
 
Last December, we signed long-term partnership agreements with Rolls Royce and Balfour Beatty for the local engineering, manufacturing and construction of AREVA nuclear reactors in the United Kingdom.
 
And in February, we reached an agreement with the Indian nuclear commission to build a partnership with various Indian players for the delivery of at least two reactors in Jaitapur, Maharashtra.
 
Typically, these partnerships serve both a global and a local purpose.
 
Globally, they give AREVA’s partners an opportunity to provide highly specialised components to new builds around the world. Between us, this is already happening with Canadian companies as well. The plant that we are building in Finland has Canadian valves and a Canadian simulator. Canadian simulators are being installed in France as I speak, including one just below AREVA’s head office.
 
Locally, these partnerships allow us to build at a lower cost, and with maximum benefits for the local economies. They help us build local skills in a way that is consistent with our responsibilities as the industry leader.
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How does this apply to the Canadian situation? Well, it applies directly. Since AREVA has a strong record of partnering with local companies on other markets, I do not see why anyone could believe that the situation would be different in Canada.
 
Canada has a great nuclear tradition, especially in Ontario. Even more importantly, this country kept its skills alive when others – some of them very close to here – were letting their own industry decay in times of low demand. There are 69,000 engineers in Ontario alone, and AREVA’s database includes the resumes of 25,000 Canadian nuclear professionals. This is a very attractive situation for a company like AREVA which needs the best skills worldwide. It would therefore be absurd to believe that, were AREVA to win a reactor in Canada, anybody with nuclear skills in this country could lose their job. The exact opposite is true: we would not only need to preserve the existing skills, but to build even more of them in Canada, as we have done in the United States, China, Japan, India and so on.
 
This is even more necessary when you consider that Ontario is much more than its own market. This province is at the center of a much larger North American market. This, of course, is very convenient for me today since I am not allowed to talk about the Ontario market itself.
 
First, there is Western Canada. Some oil sand projects have been delayed recently; but I don’t think that anyone doubts that they will start again when the price of oil shoots up. These projects will require enormous amounts of energy for extraction and upgrading.
 
Last year, AREVA did a simple, but telling study. We added all the oil sands and refinery projects scheduled to come on line between now and 2030. Then, we assessed what it would cost to power these new projects with natural gas alone. This showed that powering the Alberta oil industry alone would require as much natural gas in 2030 as all of Canada consumed in 2007. This would happen just as Canadian reserves for natural gas reach their natural peak. As a result, Canada would become a net importer of natural gas 15 years from now.
 
This shows that Western Canada needs to diversify its power sources, if only to continue powering its industry when the natural gas resource dries up. I am convinced that nuclear will be part of the solution.
 
But there is also the United States. U.S utilities have already announced that they will build seven AREVA reactors. Four of these projects are already in front of the U.S safety authority, while three others have been delayed due to the current economic crisis. When this crisis is over and AREVA finds itself building two reactors or more at the same time in the U.S market alone, we will need all the help we can get – engineers, valves, electrical equipment, construction capacities … you name it. The Canadian industry would be a very valuable partner in this adventure.
 
And nuclear is not the whole of this story. AREVA believes in clean air in general, not only in nuclear. This nuclear energy should therefore be complemented by the development of renewable energy where it makes economic sense. Two years ago, AREVA acquired a majority stake in Multibrid, a wind power company based in Germany with a technological leadership for large, offshore wind turbines. Demand for these turbines largely exceeds supply, so Multibrid is now looking for a site to build a second plant for blade manufacturing and assembly in North America. A team is being set up in Canada to compare possible sites and to liaise with developers all over the continent. With its recent Clean Energy Act, Ontario showed that it was ready to commit to clean energy. I do not want to anticipate on future announcements, but I can tell you already that AREVA has taken note. And we will obviously give priority to jurisdictions where AREVA, as a whole, feels welcome.
 
The electricity industry is at the dawn of a new era – an era that promises to deliver steady, reliable, zero emissions energy to meet the growing need in both developed and developing nations. AREVA is proud to be the industry leader at this time. We look forward to helping Canada carve for itself a significant role in this growing market.