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20.2 Notes to the consolidated financial statements for the year ended December 31, 2016
FINANCIAL INFORMATION CONCERNING ASSETS,
FINANCIAL POSITION AND FINANCIAL PERFORMANCE
20
PROVISIONS FOR LOSSES AT COMPLETION
Contract for the construction of the Olkiluoto 3 EPR power
plant
Construction of the Olkiluoto 3 EPR power plant (“the project”) progressed over the
course of 2016, meeting critical path milestones, although delays were recorded
on subcritical tasks. The key milestones met were:
p
submittal of the Operating License Application (OLA) file on April 13, 2016;
p
completion of functional tests of the cabinets of the production part (TXP);
p
tests on the full-scale simulator, which ended with the acceptance of TVO and
STUK on October 14, 2016;
p
nuclear circuit cleaning, which took place fromOctober 17 to November 3, 2016;
p
open-vessel functional tests, which started on November 19 and ended on
January 13, 2017, according to plan.
The key short-term milestones until fuel loading are as follows:
p
preparation for cold functional tests to begin in January 2017;
p
start of cold functional tests, to begin in June 2017;
p
start of hot functional test sequences in the second half of 2017;
p
Operating License Granting (OLG) at the end of 2017;
p
fuel loading in April 2018.
The project is entering the integrated testing phase leading to fuel loading in the
reactor and requires strong operational commitment by TVO. Its involvement
in maintaining the schedule until connection to the grid has never been more
necessary.
Uncertainties remain as to the end of the project. On the one hand, froma contractual
standpoint, TVO continues to limit itself to a strict interpretation of the contract.
TVO thus rejects any gradual handover of responsibility which future operational
constraints could require, particularly those related to nuclear commissioning, which
starts with fuel loading.
In addition, the principal stumbling block concerns methods of finalizing the project
in connection with the restructuring deployed by AREVA, concerning in particular
the operational and financial resources allocated to the project. In the absence of
agreement and as expressly requested by TVO, the project must remain unchanged
in its contractual form.
On the other hand, on the legal level, the pre-trial investigation phase of the legal
proceeding begun in 2008 between the AREVA-Siemens consortium and TVO
continues. The AREVA-Siemens consortium continues to exercise its rights in
connection with the arbitration proceedings.
The consortium’s claim for compensation for damages concerns a total amount
of 3.5 billion euros. TVO’s claim against the consortium amounts to approximately
2.3 billion euros. The consortium and its counsel still believe that the allegations
of intentional gross negligence set out by TVO in its claim against the consortium
remain unfounded.
In accordance with the schedule of the arbitration proceeding, a partial decision
was rendered by the court on November 7, 2016. While that decision allows some
of TVO’s claims, it does not constitute a decision on the financial outcome of the
dispute between the parties. Other intermediate decisions are expected before the
final decision, not expected before the end of 2017 or early 2018.
On the accounting level and in this context, AREVA considers that it does not have
the ability to assess the cost of the program at completion with sufficient reliability,
and in particular the start-up test phases of the reactor, especially those that begin
with fuel loading in the reactor, since TVO is officially the nuclear operator of the
Olkiluoto 3 nuclear reactor as from that date. The valuation of the cost of these test
phases, which will last until the completion of the project, remain highly dependent
on the degree of the customer’s cooperation and compliance with its operational
obligations. This cost category is termed “undiscernible”.
However, except for the costs identified above, AREVA is still able to assess the
amount of the costs to be incurred to complete the reactor’s construction. These
types of costs are called “reliable”.
In this context, and in accordance with the provisions of paragraph 32 of IAS 11,
AREVA stopped recognizing contract revenue and costs based on the percentage
of completion method. It now uses the following recognition methods:
p
revenue recognized for the contract is frozen at the level of the amount reached
at June 30, 2013;
p
contract costs are recorded in expenses as they are incurred; only costs in
the “reliable” categories that effectively contribute to the physical progress
of the reactor’s construction are charged against the provision for losses at
completion pertaining to the contract. They totaled 384 million euros for 2016.
“Undiscernible” costs recorded directly in expenses or which did not contribute
to the project’s progress amounted to 41 million euros;
p
for the full year of 2016, operating costs at completion rose 122 million euros in
connection with the net excess costs incurred over the period;
p
in view of the difficulty of accurately estimating the reactor commissioning test
phases (and in particular the phase involving fuel loading in the reactor, which
is highly dependent on TVO’s actions), a return to recognizing revenue from the
project based on the percentage of completion method will not be considered
before the second half of 2017;
p
if the existing uncertainties as to the end of the project are dispelled, AREVA will
then resume recognition of the OL3 contract in accordance with the percentage
of completion method, which will lead to an adjustment of revenue as a function
of the project’s percentage of completion.
Other provisions
At December 31, 2016 and December 31, 2015, the other provisions include in
particular:
p
provisions for disputes;
p
provisions for tax risks;
p
provisions for fines and penalties;
p
provisions for expenses related to work preparatory to the shutdown of certain
nuclear facilities;
p
provisions for guarantees given to third parties.
In particular, this item includes the risks associated with the following items:
Bioenergy operations
In February 2016, the group made the decision to withdraw from bioenergy
operations in view of AREVA’s non-optimum position in that field and the difficulties
of that operating segment in several projects in which AREVA was present.
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2016 AREVA
REFERENCE DOCUMENT