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Veolia sees market growth for nuclear waste cleanup: CEO

PARIS -- French water treatment giant Veolia expects the market for nuclear waste cleanup to keep growing worldwide and plans to focus its efforts in Japan on low-level radioactive waste, CEO Antoine Frerot said in a recent interview with The Nikkei.

     Veolia is getting into the nuclear waste cleanup market in Japan with its acquisition of Kurion, a U.S. company specializing in that field. The two companies plan to provide a broad range of services and technologies, Frerot said. 

     Excerpts from the interview follow.

Q: Five years have passed since the Fukushima disaster. How did Fukushima influence Veolia's decision to get into the nuclear industry?

A: It wasn't the Fukushima accident that prompted Veolia to take an interest in processing radioactive waste. Veolia took a strategic decision to consider the processing of hazardous waste as a priority. There are several types of hazardous waste, and radioactive waste is one of them.

     The worldwide decommissioning market, including the disposal of radioactive waste, will be worth an estimated $200 billion between 2012 and 2030. Processing of low-level radioactive waste is therefore a growth market. We took the view that the market would grow substantially, for three reasons. The first is that there is currently no economically viable solution for processing low-level radioactive waste at an affordable cost. The second is that many nuclear sites will be shut down and decommissioned in the next 30 years. The third is that the lives of many other nuclear sites will be extended. That will require the replacement of some equipment. There is a lot of contaminated old equipment that will have to be processed.

     Our work in the wake of the Fukushima accident showed Veolia's expertise in treating radioactively contaminated water, and allowed us to test the skills of U.S. company Kurion, which we decided to acquire.

Q: Why did you acquire Kurion?

A: Kurion is currently the only company capable of concentrating and capturing low-level radioactive waste at an acceptable cost. Its skills also fit very well with those of Veolia. We are expanding Kurion's market -- processing low-level and very low-level radioactive waste -- to the market for cleaning up large equipment that has been radioactively contaminated.

     With the acquisition of Kurion, Veolia is the only group offering a comprehensive range of skills and technologies to clean up radioactively contaminated equipment and process low-level and very low-level radioactive nuclear waste.

Q:You have said that the important markets are France, the U.S., the U.K. and Japan. Why did you choose those four countries?

A: Fifty-six percent of the global market for cleaning up and decommissioning radioactively contaminated equipment and managing radioactive waste is in the USA, Japan, the U.K. and France. Their share of the market is expected to be $118 billion between 2012 and 2030.

     Veolia and Kurion's expertise and skills are already recognized in those countries, and they are markets that are already open.

Q: How are you planning to move into the Japanese market?

A: Kurion is already well-known in the Japanese radioactive-waste processing market. Veolia is also known in Japan, to a lesser extent, because of its involvement in the wake of the Fukushima accident a few years ago. As a result, we already operate in Japan, and we will continue to roll out our range of services and technologies. For example, Kurion will offer a novel technology to capture tritium, in addition to its technologies for capturing other radioactive elements.

Q: Do you have contracts with Japanese electricity companies?

A: Kurion has won contracts from [Tokyo Electric Power Co. Holdings] and we want to develop our business, naturally under the supervision of the Japanese nuclear safety authority.

Q: Are you planning to set up a partnership in order to expand in the Japanese nuclear industry?

A: We would like to. To give you an example, there is a lot of contaminated soil around Fukushima. There is a large volume, at a fairly shallow depth but covering a large area. Veolia, with Kurion, is capable of treating and decontaminating that large volume of soil so that [the area] can become habitable again. We will offer these services to the public authorities.

     As well as providing our water and soil treatment technologies, we are also capable of implementing projects, depending on demand from Tepco or local authorities.

Q: You have mentioned a partnership with Tepco. Are you considering partnerships with other electricity companies, such as Kansai Electric Power?

A: We will offer our services to any company that is interested in our expertise. Companies in charge of upgrading nuclear plants will have to remove old equipment that has a low level of radioactive contamination. We will offer electricity companies a service that includes cleaning up and treating that old equipment at an affordable cost.

Q: Your revenue target is $400 million in 2020. What is Japan's share of that?

A: We will be generating revenue of $400 million per year by 2020 across the four aforementioned countries. We estimate that the market for processing low-level radioactive waste is worth $250 million per year, and the market for cleaning up nuclear equipment $150 million per year. Japan is included in those figures.

Q: Of the four countries, which has the largest market?

A: The USA. Japan is probably second, followed jointly by the U.K. and France.

Q: Why did you decide to enter the Japanese market with [environmental management company] Takeei?

A: Veolia specializes in two types of renewable energy: waste-to-energy and biomass. Given that the Japanese public authorities have decided to promote renewable energies, we want to offer our services in order to develop those two activities. In partnership with Takeei, we have already won contracts to operate two biomass plants producing electricity for the cities of Hirakawa and Hanamaki, and we will identify other projects in these areas. Waste-to-energy involves three sources of renewable energy: biogas -- methane recovered from waste; heat from incineration; and special fuels made from nonrecyclable waste.

Q: Are you looking for any partners other than Takeei in Japan?

A: Takeei is a very good partner. We don't have an exclusive agreement, but when things are going well with a partner, you naturally offer to work with that partner on new projects. We are open to working with other companies if they are interested.

Q: But Takeei will remain your main partner for the moment?

A: Takeei is currently our main partner for our biomass activities. However, we have formed other partnerships with Japanese companies in other business areas. In water, for example, we are working with Hitachi in Iraq and Vietnam to build water treatment and desalination plants.

Q: In the water business, do you see any growth opportunities in Japan, despite it being a mature market?

A: Yes, because the Japanese water market has characteristics that suit Veolia's expertise. Firstly, Japan's population occupies only a small area of land, and the greater the population density, the more complex the water issues. Secondly, Japanese people are very keen on environmental protection.

     We think we can offer Japanese cities water and wastewater services that are cheaper than and at least as good as their existing services. The Japanese system is based mainly on companies under local government control, with which we are already working, but we have few global management contracts for cities. We are capable of helping cities improve the performance of their water networks, the quality of the water distributed, control over costs and investments and customer service. For example, we are providing these services in the city of Hakone, where we manage the whole public service related to water.

Q: Japan is often criticized for having a closed water market. What is your opinion?

A: Firstly, many markets are hard to break into. Japan is not the easiest, but we have still been working there since 2002. We are currently the only non-Japanese company working in Japan's water industry. We are the only private-sector foreign company to have won a public service concession, the drinking water contract in Hakone in 2014.

     Our activities mainly involve designing, building, operating and maintaining water and wastewater management services, as with our contracts in Hiroshima, Chiba and Hakone; providing user services, as with the contracts won by our Jenets subsidiary in Osaka and Tokyo; and managing water distribution networks. Contracts with our industrial customers include process water management and wastewater treatment.

     Developing our business in Japan is a genuine ambition of ours. In particular, we think we can provide water management services at a more attractive price. Japanese people pay a lot of money for their water, but that money still does not cover all water public companies' costs. I hope that the value we add will convince municipal clients to work with us. Maybe we will look for Japanese partners in that area as well. I think that the market will open up more in future.

Q: Can you explain Veolia's Asian strategy for its waste and water businesses?

A: Veolia's strategy in Asia is in line with our strategy everywhere else in the world.

     Our policy is to apply our strategy to Asia's various countries depending on their needs. Currently, countries like China, Japan, South Korea, Singapore and India have different needs. In China, for example, we have developed a large business managing water services for major cities. We now want to develop our activities relating to the circular economy [i.e., an industrial economy that produces little waste] and our services for large manufacturers: treating hazardous waste, managing the water cycle at industrial parks and managing heating systems.

     Another example would be our contracts in South Korea, which currently mainly involve industrial water management, but we want to develop our biomass, energy efficiency and hazardous-waste treatment businesses.

     The way we apply our strategy in the various countries depends on public policy. When a public policy relates to one of our specialist businesses, we try to provide solutions to our clients.

Q: What is your largest market in Asia?

A: China, where we have been operating since the mid-1990s. However, we are planning to expand our business in all our existing Asian markets. We expect our Asian revenue to grow by 17% between 2015 and 2018, with annual revenue growth of 30% in industrial contracts alone.

Interviewed by Nikkei staff writer Yasuo Takeuchi

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