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Last month, Areva, the French nuclear engineering group, and Mitsubishi Heavy Industries (MHI) of Japan signed a deal to develop a new generation of nuclear power plants. In a world where new nuclear plants are rare, that might seem strange. But amid mounting concerns about global warming and continuing high oil prices, power plant builders are gearing up for a new nuclear era.

Moving to a situation of sustained demand for atomic power plants is likely to prove challenging even for the select band of precision engineers expert in the technology. New customers will want plants with more fail-safes, and built-in mechanisms to guard against any foreseeable terrorist attack.

Designing such plants is going to cost serious money. To recoup that outlay and make healthy profits, nuclear technology companies will need to sell a standard design to as many customers as possible, which means looking beyond their old national markets. So, it is no surprise that the collaboration between Areva and MHI has two goals: sharing development costs and enhancing access to international markets for each partner.

Each company need of the other. Both France and Japan have developed substantial parks of nuclear power stations because they lack fossil fuel resources. The three French companies that were home to the country’s nuclear engineering expertise, Cogema, Framatome and CEA Industrie were consolidated five years ago to form Areva, which has proprietary nuclear plant technology.

In Japan, construction of the country’s 54 nuclear reactors was divided between MHI, using licensed pressurised water reactor (PWR) technology from Westinghouse of the US, Hitachi, which has a partnership with General Electric, and Toshiba, which also built PWR designs.

All three Japanese companies want to leverage their experience both to build the new reactors in Japan, and to enter a resurgent US market and exploit new opportunities in Asia. But MHI’s ambitions were upset when Toshiba agreed to buy Westinghouse for $4.2bn in a deal completed last month. This secured access to US technology and markets for Toshiba. At the same time, Hitachi and GE have already reinforced their partnership and won a joint contract to build a new nuclear generating station in Texas. It will be the first new US nuclear plant started since 1979, when a serious nuclear accident at Three Mile Island, Pennsylvania caused a 27-year dearth of new orders. MHI was out in the cold, without a contemporary design, despite decades of industrial experience.

On the face of it, Areva’s position looked strong. It claimed to be the only company in the world with expertise in every stage of the nuclear life-cycle, from mining uranium through generation to spent-fuel reprocessing. It has built power plants in China, seen as a strong market for the future, and has submitted proposals to build the US’s first nuclear waste re-processing plant, with US partners. It is also project manager on the construction of Europe’s first new-generation EPR pressurised water reactor in Finland. And it can be sure of a key role in the construction of the first French EPR reactor, even if the project manager will be EdF.

But building nuclear plants are hugely capital intensive (though they are relatively cheap to run once completed). Construction of the prototype Finnish plant has been hit by delays, and now looks set to take five years, rather than the four years Areva predicted. And as Anne Lauvergeon, the company’s chief executive, pointed out when she unveiled the deal with MHI, these two projects are very much at the heavy end of the market. The 1,600MW Finnish reactor is expected to cost €3bn and the Flamanville plant perhaps €3.3bn. Many developing countries and private power companies will want their new capacity in smaller chunks.

That is why the deal to jointly design a new plant will focus on a smaller reactor with a capacity of just 1,000MW. “It is said that the mid-sized market will expand greatly because many countries are now interested in nuclear power generation,” Ms Lauvergeon said when the collaboration was announced. She estimated global demand for 150 to 200 new nuclear plants, including mid-sized models, in the next 25 years.

Kazuo Tsukada, president of MHI, said: “It is true that the Westinghouse buy-out triggered the sector’s global reorganisation, but a bigger impact was that we have entered an era when we can expect strong demand for nuclear power around the world.”

Areva and MHI already know each other well. The two companies worked together to build the Rokkasho fuel reprocessing plant in Japan, using technologies developed by the French partner to construct France’s reprocessing plant at La Hague. “The alliance has been worked out on the ground of mutual trust and common vision,” said Ms Lauvergeon.

The anchor project is to design a commercial reactor that is both economic and reliable, and strong enough to withstand a direct hit by an aircraft. But the collaboration agreement also sets out a framework for other areas of possible co-operation, including procurement, services, fuel cycle management and other types of reactor.

On the one hand, the companies are seeking to share the costs of technology development, share risk in bidding for contracts, and improve the access of each to foreign markets, partly by reducing the number of competitors. But as the procurement element shows, they are also seeking to reduce operating costs by buying key components together and, thus, achieving economies of scale.

Building nuclear power plants is never going to be a volume industry. But collaborations across national boundaries should help to bring down costs, making nuclear power more competitive with alternative generating technologies.

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