From Money Morning Staff Reports
In a sign that the planned construction of new nuclear reactors in the U.S. market could jump-start the nation’s moribund manufacturing sector, France's Areva SA and defense-industry giant Northrop Grumman Corp. (NOC) have formed a joint venture to make nuclear reactor vessels, steam generators and other related components at Northrop's Newport News shipyard in Virginia.
The venture – Areva Newport News LLC – will emanate from a $360 million investment, and will lead to the construction of a 300,000-square-foot production-and-engineering facility, the two companies said yesterday (Thursday). It will employ 500 workers when completed in 2011, according to an MSNMoneycentral report.
Mike Petters, president of Northrop Grumman Shipbuilding, the unit that has signed on to work with Areva, told The Wall Street Journal that “we've watched manufacturing wane in shipbuilding and we've watched for other opportunities to go into adjacent areas…We think a nuclear renaissance is coming and we have the work force.”
The facility will promote U.S. market sales of Areva’s “evolutionary power reactor,” or EPR. Areva is seeking to get the reactor design certified by the Nuclear Regulatory Commission (NRC) for use in the U.S. market, The Journal reported.
The deal is also the latest illustration that commercial nuclear power – which has been on a more or less permanent hiatus in the U.S. market since the 1979 near-meltdown at the Three Mile Island nuclear powerlant near Harrisburg, Pa.— may finally be making a comeback in the energy-starved U.S. market.
There hasn’t been a single new nuclear plant built since the Three Mile Island accident; this new manufacturing facility will be the first of its kind built in this country in 35 years, the Newport News Daily Press reported.
The state-run Areva is trying to compete in an industry in which Japanese firms – such as Hitachi Ltd. (ADR: HIT) and Toshiba Corp. (OTC: TOSBF), have come to play a large role. No surprise, too, that China is building up its nuclear capabilities, and has global objectives for that business.
“Our target is 80% U.S. content” for U.S. nuclear power plants, Anne Lauvergeon, chief executive of Areva, told The Journal. Lauvergeon believes Areva’s linkup with Northrop will give the French company a competitive advantage over rivals that are more reliant on imported goods. That’s why she said that she’s emphasizing the need to have 80% of the content for U.S. reactors to be built domestically.
Orders from U.S. nuclear operators could top $100 billion in coming years, and some are hoping that a wave of nuclear construction could also bolster the U.S.'s ailing manufacturing sector.
Areva’s Lauvergeon said her company’s existing heavy manufacturing facility at Chalon/Saint Marcel, France, is operating at capacity with a five-year backlog of orders. Nucelar plants built with Areva's design are under construction in France, Finland and China. Three U.S. utilities have selected Areva's design including Constellation Energy Group Inc. (CEG), PPL Corp. (PPL) and Ameren Corp. (AEE).
With its decision to invest so heavily in the U.S. market – and to involve a partner – it’s clear Areva is highly confident that plans to build new nuclear plants in North America will move forward, The Journal reported.
News and Related Story Links:
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The Wall Street Journal:
Areva in Nuclear Reactor Venture With Northrop Grumman. -
MSNMoneyCentral:
AREVA plans US nuclear parts plant. -
Money Morning Commodities Investing Series:
Cashing in on Commodities: The Short- and Long-Term Solutions to the Growing Global Energy Crisis. -
Money Morning Economic Forecasting Series:
Outlook 2008: Continued Supply Crunches Will Add a “Glow” to Uranium Stocks. -
Wikipedia:
European Pressurized Water Reactor. -
The Daily Press:
Northrop Grumman and French nuclear giant plan Newport News facility.