Rosatom powers through nuclear industry woes

For most companies, problems for three of their biggest competitors would probably be cause for celebration. But at Russian nuclear conglomerate Rosatom, the recent setbacks at rivals Westinghouse, Areva and Kepco have instead caused concern.

Their woes are representative of the wider threat from renewable and other sources of energy to the nuclear industry, according to Kirill Komarov, Rosatom’s deputy chief executive, amid ambitious growth plans by the sprawling state-run group.

“It is not just bad for them, but bad for the entire industry,” says Mr Komarov. “The real competition now, it is not between different nuclear vendors. We are competing with coal, with gas, with renewables . . . to provide a reasonable, economical solution.”

Increased costs of next-generation nuclear technology and a slowing of new orders, partly as a result of rising competition from renewables and other alternative energy sources, have added to the pressure on the industry.

Japan’s Toshiba has withdrawn from international projects after making a $6.3bn writedown at its Westinghouse unit, France’s Areva is mired in debt and undergoing a far-reaching restructuring after a state-backed recapitalisation, and South Korea’s new president has vowed to abandon nuclear power, in a blow to state-owned Kepco.  

“The main problem for the whole [nuclear] industry is lack of trust,” Mr Komarov says. “When we see examples of somebody failing with some project, it is not good for everyone . . . and this is why we cannot say we are happy about Areva and Westinghouse.”

Many analysts still see Rosatom, a conglomerate that spans the nuclear energy industry, as a beneficiary of the crisis given its ambitions. It is managing 42 power plant projects in 12 countries including EU members Finland and Hungary, has commissioned 10 nuclear units in the past decade, and has a 10-year order book worth $133bn, excluding its domestic business. This plays a part in the forecasts of the International Energy Agency of a tripling of global nuclear capacity by 2060.

Often compared with a government ministry, it has a clout in Moscow matched only by oil and gas giants Rosneft and Gazprom. While Rosatom stresses that it steers clear of politics, its industrial clout has helped the Kremlin. A $22bn project to build four reactors in Turkey was halted in December 2015 after the Turkish air force shot down a Russian fighter jet. But soon after a warming of relations in 2016, the project got under way again. Last week, Rosatom signed a preliminary agreement to sell 49 per cent to Turkish investors.

Rosatom is also building power plants in Belarus, India, Iran, China and Bangladesh, as well as eight sites in Russia. Agreements have been signed for projects in Egypt, Nigeria, Jordan and Armenia.

Rosatom’s increased influence has unnerved some, however. Its role as a 34 per cent shareholder and supplier of finance and atomic fuel for Finland’s Hanhikivi plant almost caused the collapse of the Finnish government in 2014, when the country’s Green party left the previous ruling coalition in protest.

The EU took three years to approve Hungary’s Pak II plant, built and financed by Rosatom, amid fears in Brussels of Russian leverage on the bloc’s eastern flank.

“Rosatom is certainly seeking an expansionary policy . . . but there are concerns from certain EU states and companies regarding its role as a Kremlin-controlled company. They completely lack transparency,” says Dr Paul Dorfman of the Energy Institute at University College London.

“It is promising a lot . . . but it might not turn out to be the vast nuclear renaissance that it looks like.”

But given the troubles at western rivals and the pivot by Seoul, some industry analysts say only China’s collection of state-controlled nuclear firms have similar scale to challenge Rosatom.

“There is an opportunity and it will increase if the decision by the Korean government inhibits Kepco’s international ambitions,” says Tim Yeo, chairman of industry-funded lobby group New Nuclear Watch Europe. “If that happens the market is wide open for Rosatom and the Chinese to dominate globally.”

Rosatom is already taking advantage. Last year, it signed the first contract to supply fuel to a power station built by a western rival in Sweden. Mr Komarov says a similar deal in the US is possible.

Rosatom is targeting South American and African countries for future projects, and recently signed a “very broad agreement to start talking” with Saudi Arabia.

But the biggest shift in strategy is Rosatom’s recent decision to invest in wind energy. The company has retooled some of its production capacity to build turbines, and says its experience of handling nuclear power sites is helpful in managing wind-powered ones. A project with 1GW of capacity is in process.

“We do not invest in McDonald’s because we know nothing about burgers,” says Mr Komarov. “We can use our industrial capabilities and market knowledge to enter a new [energy] segment.”

Russia also recently unveiled subsidies for domestically-built renewable technology.

“All nuclear companies are starting to recognise the seriousness of the competitive threat from rapidly cheapening renewables,” says Mr Yeo. “Rosatom’s move into renewables is not too late and may secure second mover advantage because companies investing now benefit from lower costs.”

Mr Komarov is no renewable evangelist, however. He notes that to provide the same power as a 1,200MW nuclear plant with a footprint of 1 sq km, you would need a wind farm the size of Andorra and a solar panel the size of Copenhagen, adding that “the answer is in combination”.

“If we are serious about a green future for the world . . . then there is space for everybody,” he says