Areva issues profit warning
The Financial Times – as reported by MSNBC.msn.com – is reporting that Areva will post sharply lower profits in 2006 compared to 2005. A big contribution to the lowered estimates are increased provisions for delays and increased costs at Olkiluoto 3, its first ever European Pressurized Reactor (EPR) construction project in Finland.
While I know that many nukes are a bit disappointed that the project is behind schedule and over budget, that information should be taken in context. Areva considers that it collectively contains one of the highest levels of nuclear construction experience in the world; I think that the company leaders underestimated the difficulty of constructing a new, first of a kind plant.
It has been, after all, some 15 years since the start of the last reactor built in Europe. Even though there are people on the site that have nuclear plant construction experience, it is dated and rusty. All industries have expectations of improvements based on learning, but they often fail to understand that real learning is based on individual human beings, focused training programs, good “lessons learned” programs, and practice.
Teams that have been out of the game for 15 years should be expected to have some initial adjustments necessary before they are back to where they were before the hiatus began. I fully believe that Areva will get its act together and have much better results on the second, third and forth of a kind plants. They will, however, have to eat some of the increased costs of the first one in order to get those follow-on chances.
