November 26, 2017 11:35 am JST
Interview

French nuclear company New Areva pins hopes on reopening of Japanese reactors

CEO concerned over weak profit margins from low uranium prices

TALLULAH LUTKIN and TOGO SHIRAISHI, Nikkei staff writers

The No. 3 and No. 4 reactors at Kansai Electric's Takahama nuclear plant use MOX fuel. © Kyodo

PARIS -- The head of French nuclear company New Areva has welcomed the reopening of Japanese nuclear reactors following the Fukushima disaster and hopes more will soon follow.

Philippe Knoche, chief executive of New Areva. (Photo by Tallulah Lutkin)

Chief Executive Philippe Knoche said the reopenings are good for New Areva's business, as well as for Japan's energy independence. He also said the company's profit margin may drop in the short term due to a decline in uranium prices.

"We're very glad Japan has already restarted five reactors," Knoche told the Nikkei Asian Review in a recent interview. "It's very important for us and for nuclear worldwide."

New Areva benefits from the operation of Japanese reactors, some of which use mixed-oxide, or MOX, fuel. The company exports MOX fuel, which combines uranium with plutonium extracted from spent fuel, to Japan from France.

The company hopes to eventually sell to Japan the nuclear fuel from its uranium mines once the country's existing stock is exhausted. New Areva, also known as Newco, earns just 10% of its revenue in Japan, which in the past couple of years has restarted five out of 42 reactors. Additional reactors are expected to restart in the coming years.

With Japan reopening nuclear power plants after the Fukushima nuclear disaster in 2011, it could help boost the reputation for nuclear power. Knoche said he believes that "it has an educational effect on the world to see Japan restarting nuclear."

Knoche said nuclear power helps to reduce carbon emissions, and that Japan's move would contribute to the world's low-carbon objectives. "I think Japan is more reasonable than Germany in its approach," he said, referring to Germany's decision to move away from nuclear energy, which has led to an increase in its use of coal-based fuel.

Knoche also is eyeing China for growth in the nuclear-energy sector, saying that air pollution is a major concern for the country and that nuclear energy has a distinct advantage as a zero particle-emissions energy source.

New Areva is the temporary name of the company, whose legal name is New Areva Holding and which combines the operations of Areva related to the nuclear fuel cycle. A name change is expected next year.

Areva has been through a particularly difficult period, and its severe financial difficulties prompted the French government to restructure the company.

New Areva was separated from the financially struggling Areva, whose financial problems are due mainly to the slump in the market for nuclear energy and stricter regulations since 2011.

The company needed a capital injection of 3 billion euros ($3.6 billion) -- from the French government and two Japanese investors, Mitsubishi Heavy Industries and Japan Nuclear Fuel, a nuclear fuel-enrichment company -- to put it back on its feet,.

The company's primary goal now is financial stability, Knoche said. "Our turnover is approximately 4 billion euros, and the idea is to manage to stabilize it at that level until 2020."

Knoche knows that objective will not be easy to attain because of difficult market conditions. "We need to be careful about low prices affecting our profit margin," he said.

Excess production capacity in the uranium market, due to Germany and Japan halting their nuclear programs, has caused prices to drop by up to 70% since 2011.

New Areva expects its operating profit margin to be "more than 8%" in 2020, compared with 9.2% in 2016. Maintaining a healthy profit margin is more important than increasing turnover, Knoche said.

Still, Knoche remains optimistic. "Around 2050, we'll need twice as much electricity with half the CO2 emissions," he said, adding that he hopes nuclear energy will play a role in reaching that goal.

He also is counting on potential new innovations, which could even be outside the energy sector, as New Areva is also researching a cancer cure using nuclear technology.

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