Enel-EDF Joint Venture Sets Foundation for Relaunch of Italian Nuclear Power Program

Researched by Industrial Info Resources (Sugar Land, Texas)--Italian electricity company Enel SpA (BIT:ENEL) (Rome) and French electricity generator and distributor Electricite de France SA (EPA:EDF) (EDF) (Paris) recently announced the formation of Sviluppo Nucleare Italia Srl (Rome), a 50:50 joint venture company that will conduct feasibility studies for setting up at least four advanced third-generation European Pressurized Reactors (EPR) in Italy as agreed by the two companies during the Franco-Italian summit held in Rome in February 2009. Upon completion of the studies, investment decisions will be made, followed by the selection of appropriate companies to build, own and operate the plants.

The joint venture will have an eight-member Board of Directors, with each of the companies selecting four members. While EDF will select the Chairman and Vice Chairman, Enel will select the CEO of the company. The formation of the joint venture marks the first significant step toward the development of nuclear power in Italy in the 20 years since it was banned by a public referendum following the Chernobyl accident.

The CEO and General Manager of Enel, Fulvio Conti said the creation of the joint venture is the foundation of Italy's new nuclear power program. The move will create employment opportunities and contribute significantly to the nation's economic progress. Conti said that Enel has already honed its nuclear expertise and skills by the company's involvement in overseas projects and that the company would now be able to take a leading role in Italy's nuclear power program. Pierre Gadoneix, Chairman and CEO of EDF, expressed the company's happiness to be associated with Enel during the relaunch of Italy's nuclear power program. Gadoneix said that the joint venture signifies the continuation of a successful association between the two companies that began in 2007 with the construction of the Flamanville EPR in Normandy, the first EPR in France.

In November 2007, Enel and EDF signed a cooperation agreement under which Enel obtained a stake of 12.5% in the Flamanville project. The $5.7 billion Flamanville project was approved in 2006 and is scheduled to be completed by 2012. The agreement also offers Enel the option to take stakes of 12.5% in each of five additional EPR projects in France, one of which is soon going to be set up by EDF in Penly, Normandy.

Enel engineers are actively involved in the construction of the Flamanville unit with the aim of regaining their expertise and competence in the nuclear energy sector. According to the original agreement, Enel was to be involved in the design, construction and operation of the project.

Enel has been involved in international nuclear power projects for some time now. In 2004, the company bought a stake of 66% in Slovakian electricity company Slovenské Elektrárne AS (Bratislava). In 2005, Enel invested $2.7 billion in Slovenské Elektrárne to increase the capacity of the latter's reactors by 2011-12. More recently in February 2009, Enel purchased a stake of 25% in Spanish power producing company Endesa SA (MCE:ELE) (Madrid) for almost $16 billion. Endesa owns equity stakes in three of Spain's nuclear reactors, all of which are pressurized water reactors, each with a capacity of 1,000 megawatts.

Italy's electricity is sourced from gas, oil, coal, nuclear power and hydropower. More than 10% of the nation's supply comes from imported nuclear sources. According to reports from 2007, the country produced a gross of 314 billion kilowatt-hours (kWh) of electricity, of which gas accounted for 53.5%, coal for 16%, oil and hydropower for 12% each, and renewable sources for the balance. The only G8 country without its own nuclear power sources, Italy is the world's largest importer of electricity, with 86% of its power supply being imported. A statistical review conducted by BP plc (NYSE:BP) (London, United Kingdom) forecasts that Italy's power mix in 2009 will involve 50% from gas, 16% from coal, 14% each from oil and hydropower, and 6% from renewable sources.

The country's energy policy as defined by the new government in 2008 states that Italy will start building nuclear power plants within five years and achieve a supply of 25% from nuclear sources by 2030. The country will need to set up eight to 10 reactors in order to meet this target. Work on the first reactor is scheduled to begin in 2013 and be completed by 2018. The comprehensive economic development legislation passed last month reaffirms this target. The government now has about six months to select potential sites and technology and to set up a regulatory authority that would manage the program. The objective of reintroducing nuclear power to the nation's power map is to reduce the dependence of the nation on expensive oil and gas, which has already made Italy's power the most expensive in Europe. Additionally, the government fears that excessive dependence on fossil fuels leaves the nation open to price volatility and supply issues.

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