* Rosatom agreed to take a 34-pct stake in the plant
* Finland's 6th reactor seen to cost up to 6 bln euros
* Power price forecast, Olkiluoto problems raise doubts
By Jussi Rosendahl
HELSINKI, Feb 7 A plan to build Finland's sixth
nuclear reactor hangs in the balance as investors reassess its
viability against a weaker economy and lower energy prices and a
deadline for final commitments looms.
The Fennovoima project was intended to secure cheaper energy
for its 46 investors, mainly Finnish industrials including steel
companies Outokumpu and Rautaruukki,
retailer Kesko and municipal utilities.
Last year Russian nuclear firm Rosatom extended a lifeline
to the 1,200-megawatt Fennovoima plant after Germany's E.ON
, originally a top investor, left the consortium after
a strategic review of its operations.
State-owned Rosatom, which has been stepping up its overseas
expansion, took E.ON's place with a 34 percent stake, along with
a deal to be the plant's main supplier. However, some 20 smaller
owners including Atria, Boliden and
Componenta have also said they are dropping out and
shifting investments elsewhere.
Analysts say more members may withdraw, possibly ahead of a
final commitment deadline at the end of this month, putting at
risk the project that is estimated to cost up to 6 billion euros
($8.1 billion) and to begin operating in 2024.
Part of the growing scepticism comes from delays at another
planned Finnish reactor site, Olkiluoto-3, now 7 years behind
schedule. Its owner Teollisuuden Voima and contractor
Areva-Siemens have been fighting in court over cost overruns.
"If I was an owner, especially with financial challenges,
I'd take a critical look at this project. Its risks are
considerable anyway, as we have seen in Olkiluoto," said Inderes
analyst Juha Kinnunen.
The caution is part of a trend in Europe, where costs have
surged after regulators imposed stricter safety rules following
the Fukushima disaster.
The British government in October offered 35-year state
guarantees of a price clearly higher than the current market
price to fund the Hinkley Point C plant in south-west England,
showing the level of reassurance developers in the region now
need for new reactor projects.
Fennovoima's reactor project in Pyhajoki, northern Finland,
was the first new site announced after the Fukushima disaster in
2011, as the small Nordic country, which already covers 27
percent of its power consumption with nuclear, stayed the course
to pursue cheap electricity for its energy-hungry industries and
to curb carbon emissions.
But weak European growth has hit Finnish industries like
pulp and paper and forecasts for lower energy prices are also
raising doubts over whether investments will pay off.
"I am somewhat sceptical that this project would eventually
be carried through. The financials seem challenging and many
owners have already left," said Teemu Vainio, analyst at Pareto
Securities in Helsinki.
Fennovoima CEO Juha Nurmi remained optimistic that new
investors could still join the project, but some of the leaving
owners such as Kuopion Energia and Atria recently told public
broadcaster YLE they were having trouble selling their stakes.
A main turn-off for investors could be the outlook for
energy prices. Nordic power consumption fell 1.6 percent last
year along with the decline of energy-intensive industries such
as pulp and paper. Meanwhile, the growth of renewable energy,
expected to be boosted by government subsidies, is also seen
pushing prices down.
The plant is expected to supply its owners with electricity
at a price of less than 50 euros ($68) per megawatt-hour.
Fennovoima says that is a good deal for the decades to come,
although the Nordic system contract for a power delivery in the
second quarter trades only at about 30 euros per MWh.
"News from the Finnish manufacturing industry indicate that
the demand forecasts might have been too optimistic. It could be
we wouldn't need all the nuclear reactors that are in the Nordic
pipeline right now," said Kinnunen.
Along with Fennovoima, TVO is planning another
Oslo-based Thema Consulting Group recently forecast the
Nordic system price to remain at a level around 30 euros a MWh
until 2020 and increase towards 50 euros by 2040.
"Basically, Fennovoima owners should have a strong vision
that electricity will get more expensive in the future, and that
is naturally a challenging call to make," said Pareto's Vainio.
"There is little point in making the huge investment if you
can buy cheap power from the Nordic exchange."
Outokumpu and Rautaruukki, with planned Fennovoima stakes of
11 percent and 3 percent respectively, have said they remain
committed to the plan.
Outokumpu recently announced a recapitalisation plan while
Rautaruukki has been offered a $1.6 takeover offer from SSAB --
moves which are seen helping them pay for Fennovoima.
But analysts say some of the tens of municipal utilities
could be reconsidering as local governments' combined deficit
doubled to 2.1 billion euros in 2012.
If Fennovoima secures commitments by the deadline and
members stick to the plan, there are other potential obstacles.
Rosatom's involvement wasn't included in original plans and the
government is weighing the need to renew overall approval.
With a general election coming up next year there is a
chance a new vote could trigger new opposition. Russian
involvement is also likely to invoke references to the 1986
Ville Niinisto, environmental minister and the head of
Finland's Greens party which is opposed to the Fennovoima plant,
is betting it won't even come to a vote.
"Fennovoima will likely collapse before any political
consideration is even needed. The shareholder base will come
apart," he predicted in September.
($1 = 0.6125 British pounds) ($1 = 0.7353 euros)
(Reporting By Jussi Rosendahl; Editing by Elaine Hardcastle)