Areva, Northrop to Build Nuclear Reactor Parts Plant

By [bn:PRSN=1] Jim Polson []

Oct. 23 (Bloomberg) -- Areva SA, the world's largest reactor maker, and Northrop Grumman Corp. will build a $360 million parts factory adjacent to a Virginia shipyard, easing a potential bottleneck for new nuclear plants.

The Areva Newport News joint venture will be the first full-scale U.S. maker of reactors and other massive parts since the 1990s, Tom Christopher, chief executive officer of Paris- based Areva's U.S. unit, said today in an interview. Production may start in 36 months, he said.

Areva is preparing for a global expansion of nuclear power. In the U.S., where no new plants have been built for 35 years, 24 new reactors have been proposed, and Areva has preliminary deals to build at least four of them. Proponents say the plants will add needed power without increasing greenhouse-gas emissions.

``Areva intends to build one-third of all new reactors around the world and at least seven in the U.S.,'' Areva Chief Executive Officer Anne Lauvergeon said today in a joint statement with Los Angeles-based Northrop. ``Areva Newport News is a key step.''

Northrop Grumman is the largest builder of U.S. Navy warships, including the nuclear-powered aircraft carrier Gerald R. Ford, its most expensive vessel. Closely held Lehigh Heavy Forge Corp., based in Bethlehem, Pennsylvania, will make large steel pieces such as reactor vessels, Christopher said.

`Nuclear Renaissance'

``Today is a great day for the future of nuclear energy in America,'' U.S. Senator Pete Domenici, ranking Republican on the Senate Energy and Natural Resources Committee, said today in a statement. ``That these companies are willing to make such a large investment at this time is further evidence that the nuclear renaissance in the U.S. is real.''

U.S.-built reactor parts would cost buyers 20 percent less than those built in France at current dollar-euro exchange rates, Christopher said.

Northrop Grumman fell $1.51 to $44.40 in New York Stock Exchange composite trading. Areva closed unchanged in Paris before reporting that third-quarter sales rose 9 percent to $2.94 billion euros ($3.77 billion) on progress at atomic power plant projects.

Cost Savings

The Newport News factory will use an existing drydock to load 600-ton parts directly aboard ship, saving millions in delivery costs, he said.

``We're going to take orders in the U.S. and around the world,'' Christopher said. ``Whoever comes in first, we will ship to.''

Areva will hold a 67 percent stake in the venture, with Northrop Grumman holding the rest, the companies said in a statement.

Areva competes for nuclear orders with Toshiba Corp.'s Westinghouse Electric Co., and GE Hitachi, a joint venture of General Electric Co. and Hitachi Ltd. Westinghouse and Shaw Group Inc. in August announced plans for a Louisiana factory that will make piping for nuclear plants.

``This is a step in the right direction to re-establish manufacturing capability in this country that can support new nuclear plant construction,'' Adrian Heymer, director of new plant deployment for the Nuclear Energy Institute, a Washington- based industry group, said in an interview today. ``We can expect similar announcements.''

A 2005 report by the U.S. Energy Department concluded that as many as eight reactors could be built between 2010 and 2017 with existing manufacturing capacity. The U.S. Nuclear Regulatory Commission is expecting applications through 2010 to build as many as 34 new units.

The Areva Newport News LLC joint venture will hire skilled labor from Northrop Grumman's Newport News shipyard, Christopher said. The plant is expected to employ 500 workers.

Nuclear Contribution

The factory will make parts for Areva's Evolutionary Power Reactor. Two such plants are under construction, including Western Europe's first new reactor since the world's worst nuclear plant accident at Chernobyl, Ukraine, in 1986.

Nuclear reactors may produce more than 20 percent of global electricity by 2050, up from 16 percent today, as demand for power rises in countries such as China and India, the Organization for Economic Cooperation and Development's Nuclear Energy Agency said in an Oct. 16 report.

Areva makes reactors and large parts such as steam generators, which help transfer heat from the reactor core to power-generating turbines at Chalon/Marcel in France.

``Areva is overloaded today at our existing manufacturing facility,'' Christopher said. ``We'll take the overload from France plus the U.S. markets.''

New Plants

Construction of the Newport News plant will begin in next year's first half, with production starting three years later. Only local building permits are needed, Christopher said.

In June, 41 reactors were being built around the world, with an average construction time of 62 months, the OECD report said.

UniStar Nuclear Energy LLC, Areva's joint venture with Constellation Energy Group Inc., the U.S. nuclear plant operator being acquired by Warren Buffett's MidAmerican Energy Holdings Co., has agreements to build new plants for Constellation in Maryland and New York, as well as in Pennsylvania for utility owner PPL Corp. and in Missouri for utility owner Ameren Corp.

MidAmerican ``strongly'' supports development of new plants by UniStar and is committed to build the Maryland plant, Chief Executive Officer Greg W. Abel said in an Oct. 17 statement.

Areva is building Olkiluoto 3, Finland's fifth nuclear power plant, for utility Teollisuuden Voima Oyj. The project has been plagued by component, construction and organization problems since its start in 2005 and its delivery has been pushed back three years to 2012.

Areva is also building a reactor for Electricite de France SA and won an order to supply two to China.

To contact the reporter on this story: Jim Polson in New York at jpolson@bloomberg.net.