Siemens Exits The Nuclear Energy Industry
- September 21, 2011
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Editor: Siemens is a sponsor of The Energy Collective. The post author is an independent TEC contributor and is not associated with Siemens AG.
German manufacturing giant says move “is an answer” to nation’s move to close its reactors
Siemens (ETR:SIE), the global manufacturing giant, which in recent years has shifted more of its business to solar and wind energy technologies, has formally exited the nuclear energy business. In doing so it appears to be leaving behind the potential for substantial revenue.
The Bloomberg wire service and Reuters report that the firm will scrap its deal with Russia’s Rosatom to develop the state-owned firm’s VVER pressurized water reactor (PWR) to compete with exports from Areva.
Siemens said the firm felt that after Fukushima demand for reactor exports would diminish casting doubt on the financial viability of the deal. Neither wire service included any statements from Rosatom about the decision by Siemens to end the partnership. No reactors were ever jointly built by the two firms. Rosatom has several active nuclear export contracts including new reactors being built in Turkey, India, China, and Vietnam.
Siemens exited from its nuclear reactor joint venture with Areva in 2010 after paying a financial penalty of [e]648 million ($894 million). That firm is building new reactors in Finland and France. Also, it is bidding on new work (see below). According to the Financial Times (London) under the terms of the financial settlement, Siemens has a non-compete clause with Areva that doesn’t expire until 2013.
According to the interview, he called the move “an answer” to Germany’s decision to close eight of its 17 reactors now and all of them in the next ten years.
That move has been widely hailed by green groups in Germany and by Social Democrats intent on bringing down the precarious conservative government of Chancellor Angela Merkel. At one time Merkel embraced nuclear energy helping her win the national elections in September 2010. However, the Fukushima crisis caused her panic due to political fallout in regional elections and to reverse course on keeping the reactors open past 2022.
Her decision to close reactors has been greeted with skepticism by the rest of Europe which depends on the nation’s economic stability to keep the Euro common currency afloat.
There are fears of gaps in electricity supply that will undercut Germany’s manufacturing base leading to an economic downturn and destabilization of the nation’s role as an economic bulkhead against default by Greece and other heavily indebted nations in the Euro economic system.
Loescher disagrees that there will be energy shortfalls and said he feels that Germany’s plan to derive 35% of its energy from wind and solar by 2020 is achievable. When all 17 nuclear reactors were operational, they provided about 28% of Germany’s electricity according to the World Nuclear organization. Two-thirds come from coal and natural gas.
In the near-term Germany is expected to increase its imports of natural gas from Russia. In the longer-term, the planned construction of up to five new nuclear reactors at the CEZ utility’s site at Temelin in the Czech Republic may ease the prospect of energy shortages. Areva, Rosatom, and Westinghouse are bidders for the project which could be worth up to $25 billion.
According to Bloomberg, a Siemens spokesman said the firm would continue to manufacture steam turbines for fossil fuel and nuclear powered electricity generation projects in Germany and for export.
Areva pushes for Middle East contracts
While Siemens is retreating from the nuclear business, its former partner Areva is pushing ahead to ink new deals. The latest move involves a joint venture with Japan’s Mitsubishi Heavy Industries to bid on Turkey’s second nuclear power station to be built at Sinop on the Black Sea coast. This moves follows the withdrawal of a consortium of Toshiba and TEPCO following the Fukushima nuclear crisis.
In an interesting development, Mitsubishi said it would not buy an equity stake in Areva despite previous public announcements it would pursue one. Mitsubishi Board Chairman Kazuo Tsukuda was quoted by financial wire services. as saying Areva no longer needed an infusion of cash.
Last year Areva shareholders added [e]900 in working capital ($1.24 billion). Tsukuda added that Mitsubishi would step up to offer capital to Areva if needed in the future.
The joint venture is referencing the 1,100 MW Atmea nuclear reactor for the bid in Turkey and also for a similar project in Jordan.