Costs of delay in construction of Olkiluoto III approaching price of new reactor

print this

As we reported yesterday, the power company Teollisuuden Voima (TVO) is demanding that Areva and Siemens, which are building Finland’s fifth commercial nuclear reactor in Olkiluoto on the west coast, pay massive compensation for delays in the construction project.
      The monetary damages demanded by TVO are in the range of the price of an entire new unit.
     
TVO has not submitted an official demand for compensation, but Siemens has said that TVO has estimated that it is entitled to EUR 2.4 billion to make up for the delays in the construction. The estimate is based on correspondence between the two companies.
      TVO commissioned the construction of the facility, the third reactor at the Olkiluoto location, from a consortium of Areva and Siemens. The contract is worth more than EUR 3 billion.
      Areva’s Finnish representative Osmo Kaipainen does not believe that the delay compensation demands will hold up in court, because Areva and Siemens are not benefiting at the expense of TVO.
      “This is a situation in which both sides are suffering losses”, Kaipainen says.
     
Under the original schedule, the third unit at Olkiluoto was to have been completed this year. According to the latest estimate, the project is over three years late.
      Reasons for the delay depend on who is being asked.
      Siemens and Areva blame TVO, saying that it has been slow in getting the necessary permits.
     
“Nothing can be done before the permits are in order. If they are delayed, people are at the construction site, but they cannot work”, Kaipainen says.
      TVO says that the construction on the reactor has progressed slowly.
      “The amount of planning and design work has apparently been greater than expected for the contractor”, says Jouni Silvennoinen, TVO’s project manager.
      “Construction planning is still partly going on, even though, according to the original schedule, the fuel was already to have been loaded into the reactor, and we should be in the experimental use phase.”
     
The dispute is to be argued next in a court of arbitration, under the leadership of the International Chamber of Commerce. Siemens and Areva are themselves demanding more time to complete the project, and arrears and compensation worth EUR 1 billion.
     
TVO is not commenting on the amount of damages it is demanding, citing rules set by the International Chamber of Commerce. Both sides in the dispute insist that the matter is not affecting work at the building site.
      “The idea of arbitration is that the dispute can be put in a separate tube. It is a separate matter in the implementation of the project”, Silvennoinen says.
     
TVO is 60%-owned by Pohjolan Voima, which in turn is owned by the forest companies UPM (42%) and Stora Enso (15%).
      Shareholders in the Olkiluoto venture are suffering losses from the delays as they have to buy electricity from the open market, rather than getting it at cost price from the reactor.
      Forum is the second-largest owner of TVO, with a 25% share, and the other owners are Mankala, a subsidiary of Helsinki Energy (8%) and Etelä-Pohjanmaa Voima (7%).


Previously in HS International Edition:
  TVO seeks EUR 2.4 billion in damages for Olkiluoto nuclear reactor delays (28.1.2008)
  Olkiluoto III start-up delayed again - reactor could go on stream only in 2012 (17.10.2008)

Helsingin Sanomat