October 11, 2010
MOSCOW — The Russian nuclear industry has profited handsomely from building reactors in developing countries, including India, China and Iran. Now it is testing the prospect of becoming a major supplier to the European Union, too.
Shrugging off the legacy of Chernobyl, the Russian state nuclear company, Rosatom, is preparing a bid on its second new project in the European Union, at the Temelin station in the Czech Republic, potentially worth $8 billion. Rosatom is already building a smaller unit in Bulgaria.
And the Russians, already major suppliers of low-enriched uranium fuel to the European Union under a venture with Areva, the French nuclear group, are planning independently to enter the market of fuel for Western-designed plants. Rosatom now provides 100 percent of the fuel used in Switzerland, for example, and 30 percent of all reactor uranium used in France, the Continent’s biggest consumer.
But industry analysts say Rosatom’s Czech bid is a test: Can the strategies that propelled Rosatom to become the world’s largest builder of nuclear plants through sales in emerging markets also succeed in the power-hungry developed world?
“Russia is a serious player,” said Marina Alekseyenkova, an analyst at Renaissance Capital, an investment bank in Moscow. From now on, she said, “Russia will be a bidder on every tender, globally; Russia will go everywhere.”
That includes the United States. A subsidiary of Rosatom supplies about 45 percent of the nuclear fuel used by American utilities, created from diluted bomb material under a post-cold-war treaty to discourage proliferation. About 10 percent of all electricity in the United States is generated from this former Russian bomb material.
As a legacy of the cold war, Russia possesses about 40 percent of the world’s uranium enrichment capacity, much more than it needs to service its domestic reactors. Enrichment refers to raising the level of the isotope 235 from about 0.7 percent in natural uranium to 3 percent to 5 percent for civilian reactor fuel.
Rosatom says it intends to increase its share of the global fuel market to 25 percent by 2025, from 17 percent today. The strategy is to make money, but also to leverage the low fuel costs in Russia to win other business. This is done by bundling favorable deals on low-enriched uranium with other services, like reactor construction.
And Rosatom has been promoting another singular advantage, one that also shows the Russians’ peculiarly high comfort level with all things nuclear, even after Chernobyl: a willingness to take nuclear waste off the hands of clients, particularly if they buy Russian reactors.
Russian officials say that, despite the nuclear reactor explosion at Chernobyl in 1986, their industry never went into hibernation because of public disillusionment with nuclear power, as happened in the United States. The Russians made no great leaps in technology in recent decades, but also lost no ground.
“We never stopped building, even after Chernobyl,” said Sergei G. Novikov, the spokesman for Rosatom. “We moved very slowly but never stopped.”
Of the 60 reactors under construction worldwide, Rosatom is building 15 — 10 in Russia and 5 abroad — according to the Nuclear Energy Institute, a trade group in Washington.
By comparison, Westinghouse, the largest American builder of nuclear power plants, has not completed a reactor as lead contractor in decades, even though it has built more power plants than any other company in the world, mostly in the 1960s and 1970s.
Outside specialists generally endorse the Russian plant designs, saying that they are now fully competitive with those of nuclear plant builders in the United States and Europe. Still, in a nod to the Chernobyl legacy, the subsidiary for overseas construction has said that it budgets for public relations activities in countries where it intends to work.
Rosatom, meanwhile, is striving to take advantage of its monopoly hold on the industry at home to aid in exports.
It is a vertically integrated company, with divisions mining uranium, enriching fuel, building reactors and even decommissioning old plants.
To better compete with Areva, the dominant nuclear company in Europe, Rosatom in 2009 formed a strategic alliance with Siemens of Germany, after Siemens sold a stake in Areva.
After signing a deal in China last month to build two sophisticated reactors that burn plutonium-based fuel, the chief executive of Rosatom, Sergei Kiriyenko, a former prime minister, told reporters there that sales would triple by 2030, to $50 billion annually.
The company says it hopes to continue winning business by bundling construction contracts with deals for fuel or joint ventures to transfer technology to the customer country. It is expected to use this strategy for the Czech bid.
Under legislation that might have been more difficult to push through a freer political system, Russia allows the importation of spent nuclear fuel from reactors elsewhere.
Supported by Vladimir V. Putin, the president at that time, it is integral to the policies for global expansion of Russian nuclear sales, because waste disposal can be a major sticking point to approval of new nuclear power plants in other countries.
“I don’t know other suppliers that can provide similar services,” Ms. Alekseyenkova, the industry analyst in Moscow, said of Rosatom’s service of importing waste.
Storing spent fuel is profitable today, and possessing it could become even more so as plutonium-based fuels become more widely used, Mr. Novikov, the Rosatom spokesman, said. In Russia, as in France, the industry is looking at spent fuel not as a long-term headache but as the raw material for a future business making mixed-oxide fuel.
Only Areva, the French nuclear group, offers a similar array of services over the entire nuclear fuel cycle, nuclear industry analysts said. Other manufacturers have to team up to offer an integrated fuel and reactor package.
For the Czech bid, Atomstroyexport, a subsidiary of Rosatom for reactor construction outside Russia, has joined the Czech industrial giant Skoda to bid against Westinghouse and Areva of France, for two new reactors at the Temelin plant. The CEZ Group, a Czech utility that is 70 percent owned by the government, is expected to pick a winner in early 2012.