Areva - Reference Document 2016

BUSINESS OVERVIEW

6.4 Operations

Relations with customers and suppliers

CUSTOMERS

Customers consist of utilities on every continent. Every year, the Installed Base

Business Unit provides maintenance and upgrades to more than 250 reactors

around the world.

Changes in the energy environment, the pressures of deregulation and the

consequences of the Fukushima accident all weigh on the utilities’ profitability.

Their objective is to optimize their costs and increase the operating period of their

power plants while ensuring an optimum level of safety.

SUPPLIERS

Orders to suppliers represent a large share of the cost structure of the Installed

Base’s projects. They concern:

subcontracted labor for scheduled unit outages and design activities;

the supply of products or equipment such as parts and tooling to replace steam

generators in the framework of component replacement and power plant

modernization operations.

Market and competitive position

As part of its services to the installed base, AREVA brings solutions for all types of

reactor technologies, whether:

PWRs, including Russian-designed VVERs;

BWRs;

CANDU pressurized heavy water reactors (CANada Deuterium Uranium).

Outages are scheduled for these reactors every 12 to 24 months for fuel reloading,

for servicing and maintenance, and sometimes to replace heavy components or

install capital items to improve their performance and extend their operating period

while ensuring a maximum level of safety.

The market is led in particular by activities related to power plant aging, such as

upgrades to prolong the operating period of power plants, engineering work, and

programs to enhance safety. Elsewhere, certain cross-cutting programs set up by

the nuclear operators with the objective of reducing reactor operating costs should

generating significant investment opportunities in the short and medium terms.

More generally, in services to the installed base, AREVA and Toshiba-Westinghouse

are the two major players, followed by General Electric allied with two Japanese

companies, Hitachi and Mitsubishi Heavy Industries (MHI).

Other companies, both specialized and non-specialized, are also active in themarket

in every country with nuclear power plants, including KPS in South Korea, SNC

Lavalin in Canada, Tecnatom in Spain, and the subsidiaries of the utilities in China,

among others. At the global level, services to nuclear power plants continue to

be highly competitive. In Europe and the United States, the competition has even

increased in certain segments, such as non-destructive examinations and general

maintenance.

Outlook and development goals

Like the global energy market, the outlook for the Installed Base Business Unit

remains relatively stable. However, operators want to continue to operate their reactor

fleets, particularly in the United States, in France with EDF’s “

Grand Carénage

”

program of retrofits, and in the United Kingdom.

To increase business volume, the Installed Base Business Unit is pursuing a strategy

of localization beyond its traditional domestic markets (France, Germany and the

United States), with a particular focus on Asia, Central Europe, Eastern Europe

and South Africa. At the same time, it continues to perfect its work tools and to

raise productivity.

6.4.2.1.3.

Large projects

Businesses

The missions of the Large Projects Business Unit are to:

submit comprehensive, structured offers within the scope of AREVA NP’s core

business (nuclear steam supply systems and safety instrumentation and control)

to reactor projects, in support of EDF, which is taking the leadership of the French

nuclear industry;

carry out construction projects by assuming responsibility for the execution

of reactor projects, i.e. engineering, procurement, construction and startup

to complete projects in progress and, within the scope of AREVA NP’s core

business, for new projects;

manage purchasing and procurement for the construction projects;

provide project services (standard Project Management Office schedule, cost

estimating, contract management, risks and opportunities, industrial and

operational plan) to the proposal and project teams; and

continuously improve the competitiveness of new reactor projects in terms of

both costs and schedule, particularly by optimizing execution planning within

the scope of AREVA NP’s core business.

Operations and highlights

REACTORS UNDER CONSTRUCTION

China – Taishan 1 & 2

In the first half of 2016, the Taishan project entered the start-up testing phase for

unit 1 of the plant. After successful cold testing and leak testing of the containment

building in March and June, the instrumentation and control system cabinets of

unit 1 were reconfigured in preparation for hot start-up tests.

Finland – Olkiluoto 3

In 2016, construction of the Olkiluoto 3 EPR made progress in compliance with

the milestones of the critical path.

Functional testing of power plant systems and components began in April. Also

in the first half of 2016, the main electromechanical installations were completed,

including piping work, a prerequisite to the vessel flushing sequence. The latter

was completed in early November, six weeks ahead of the updated schedule.

Meanwhile, tests of the full-scale simulator were also completed.

Note: The mission for the OL3 project – which will remain within AREVA NP in the

AREVA SA scope of consolidation after the sale of New NP to EDF and strategic

investors – is to complete the Olkiluoto 3 EPR reactor project in Finland with the

necessary resources and in compliance with its contractual obligations.

France – Flamanville 3

Work continues at the Flamanville 3 EPR reactor.

In the first quarter of 2016, a first milestone was met with the completion of the

mechanical installation of the primary cooling system. In June, the power plant’s

operational instrumentation and control system was successfully configured for

the start of the reactor’s unit commissioning tests.

Status of the FA3 vessel

In the last quarter of 2014, the results of quality testing on the Flamanville 3

reactor vessel revealed substantial carbon segregation leading to non-compliance

with the regulatory requirements (resilience parameter mentioned in point 4 of

Appendix 1 of the ESPN Order) in the center part of the upper and lower vessel

heads (closure head and bottom head). In order to provide technical proof that

there are no industrial or occupational safety risks, AREVA prepared a new vessel

design report presentation and proposed a program of supplementary testing to

2016 AREVA

REFERENCE DOCUMENT