Market Outlook. Fabrication Market Outlook. July 2016 UXC.COM A PUBLICATION OF 1501 MACY DRIVE ROSWELL, GA PH FX

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1 Market Outlook July 2016 A PUBLICATION OF UXC.COM Fabrication Market Outlook 1501 MACY DRIVE ROSWELL, GA PH FX

2 NOTICE The Ux Consulting Company, LLC ( UxC ) shall have title to, ownership of, and all proprietary rights in this Report. Under United States federal copyright law (17 USC 101 et seq.) it is illegal to reproduce this Report by any means without written permission from UxC. The information contained in this Report is obtained from sources that UxC believes to be reliable. UxC makes no warranty or representation, express or implied, with respect to the accuracy, completeness or usefulness of the information contained in this Report and UxC, to the maximum extent permitted by law, assumes no liability for the use or effects of any of the information or data contained in this Report. It is UxC s strict policy not to endorse, promote, or recommend any particular securities, currencies, or other financial products or instruments. Nothing contained in this Report is intended to constitute investment, legal, tax, accounting or other professional advice and the reader should not rely on the information provided in this Report for making financial decisions. The Ux U 3O 8 Price and other Ux Price indicators are developed by The Ux Consulting Company, LLC (UxC) and are proprietary and exclusive intellectual property of UxC. These price indicators are provided to UxC s customers through the Ux Weekly publication and are made available on UxC s public website solely at UxC s discretion. They may not be reproduced or otherwise used without UxC s express permission. UxC, Ux Weekly, Ux U 3O 8 Price, Ux, and Ux Consulting, U-PRICE, and SWU-PRICE are trademarks of The Ux Consulting Company, LLC.

3 Fabrication Market Outlook - Jul 2016 Table of Contents Table of Contents Executive Summary i Essay: Is There MOX In Your Future?... i LWR Fuel Demand and Procurement of Nuclear Fuel Fabrication Services... i UxC Utility Fabrication Market Survey... ii The World s LWR Nuclear Fuel Fabricators... ii Supply and Demand in the Nuclear Fuel Fabrication Industry... iii LWR Nuclear Fuel Fabrication Markets... iii LWR Nuclear Fuel Fabrication Prices... iv Non-LWR Fuel Fabrication Markets... iv Introduction and Overview 11 What s New in the 2016 Report? Structure of Report Nuclear Fuel Fabrication Market Primer 17 Technical Content Segmentation of Fabrication Markets Price and Purchasing Considerations Dynamic Market Structure Essay: Is There MOX In Your Future? 21 What is MOX Fuel? Fast Neutron Reactors MOX Fuel Utilization Benefits Concerns History of MOX Fuel Utilization MOX Fabrication Facilities Around the World France United Kingdom Japan United States Russia China Non-Proliferation Concerns and MOX Japan Iran North and South Korea Uncertain Future of the U.S. MOX Program Russia s REMIX Fuel: An Alternative Approach to MOX Is There MOX in Your Future? Western Europe United States Japan Russia China Conclusions Reactor Developments and Demand Outlook 40 Reactor Capacities Anticipated by Country by Alternative UxC Reactor Forecast Cases Current and Future Reactor Types Currently Operating Reactors New Reactors UxC 1

4 Table of Contents Fabrication Market Outlook - Jul 2016 New Reactor Types New Reactor Vendors Fuel Fabrication Demand Forecasts UxC Fabrication Market Demand Modeling UxC Requirements Model (URM) Use of URM Fabrication Demand Forecasts UxC Fabrication Demand Forecasts Global LWR Fuel Fabrication Requirements Regional LWR Fuel Fabrication Requirements LWR Fabrication Requirements by Fuel Type Conclusions from Demand Analysis Utility Procurement Approaches and Contracting Issues 53 Procurement of Nuclear Fuel Fabrication Services Extension of Existing Contracts Competitive Procurement Fabrication Bid Specifications Evaluation of Proposals Final Contract Negotiations Bundling of Fabrication with Other Fuel Cycle Materials and Services Unbundling: Separation of Powder, Pellets, and Assembly History of Fabrication Bundling LWR Markets VVER Markets Current Utility Attitudes Towards Fabrication Bundling Possible Utility Procurement Approaches to Bundling Single Comprehensive Price Firm Supply of Uranium-Related Services; Separate Prices Fuel Cycle Options Menu Results from UxC Utility Survey State of the Market Cycle Length New Contract Scope Procurement Lead Time Adequacy of Competition Vendors Declining to Bid Procurement Approach Fuel Delivery Schedules and Inventories Consistency of Supply Acceptance of New Designs From Established Suppliers Consideration of Supplies from New Vendors Acceptance of U.S. MOX Fuel Fuel Contracting Criteria Attitude Toward Russia Concerns Regarding AREVA Conclusions Lessons Learned The World s Nuclear Fuel Fabricators 71 The Mega-Vendors AREVA Ownership and Organization Ownership Current Organization Fuel Business Unit (FBU) Overview AREVA s Financial Problems and Plans for Reorganization Finances Reorganization of AREVA Impact on AREVA s Fuel Fabrication Business European Fuel Fabrication Operations Production Facilities UxC

5 Fabrication Market Outlook - Jul 2016 Table of Contents Markets and Products TVEL Fuel Company Subcontract AREVA s Fuel Assembly Designs U.S. Fuel Fabrication Operations Production Facilities Markets and Products Japanese Fuel Fabrication Operations Chinese Fuel Fabrication Operations Kazakh Fuel Fabrication Operations Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Global Nuclear Fuel (GNF) Ownership and Organization U.S. and European Fuel Fabrication Operations Production Facilities Markets and Products Strategic Alliance With TVEL Fuel Company GNF s Fuel Assembly Designs Japanese Fuel Fabrication Operations Production Facilities Markets and Products Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Westinghouse Electric Company Ownership and Organization Ownership Organization Regional Organizations Westinghouse Nuclear Fuel (WNF) Overview Agreements and Joint Ventures with Foreign Suppliers European Fuel Fabrication Operations Westinghouse Electric Sweden, Västerås Nuclear Fuel Factory Springfields Fuels, Ltd. Preston, Lancashire, UK Markets and Products Westinghouse Fuel Assembly Designs U.S. Fuel Fabrication Operations Columbia Fuel Fabrication Facility Windsor Fuel Components Facility Markets and Products Westinghouse Fuel Assembly Designs VVER Fuel Fabrication Operations Japanese Fuel Fabrication Operations Chinese Fuel Fabrication Operations Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Emerging International Suppliers TVEL Fuel Company (TVEL) Ownership and Organization Impact of Geopolitics Production Facilities MSZ Elektrostal NCCP Novosibirsk Plans for Expanding Fabrication Capability New Nuclear Fuel Plant in Ukraine Other Plans for Possible New Plants Consolidation of TVEL Fabrication Activities Technical and Engineering Support Past, Present, and Future Markets UxC 3

6 Table of Contents Fabrication Market Outlook - Jul 2016 VVER Fuel Markets BWR and PWR Fuel Markets AREVA Subcontract TVS-KVADRAT TVEL s PWR Reload Fuel Initiative TVEL Technology and Fuel Designs VVER-440 Fuel Assemblies VVER-1000 Fuel Assemblies Western PWR Fuel Assemblies Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments KEPCO Nuclear Fuel (KNF) Ownership and Organization Fuel Fabrication Operations Current and Future Markets Domestic Market Foreign Markets KNF Fuel Designs Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Regional and National Fuel Suppliers ENUSA Industrias Avanzadas, S.A. (ENUSA) Spain Ownership and Organization Fuel Fabrication Operations Juzbado Nuclear Fuel Factory Current and Future Markets Spanish Market Foreign Markets ENUSA Fuel Assembly Designs Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Editor s Note on Japan Mitsubishi Nuclear Fuel (MNF) Japan Ownership and Organization Fuel Fabrication Operations Japanese Operations Tokai-mura Works Foreign Operations Current and Future Markets Japanese Market Foreign Markets MNF Fuel Designs Domestic Designs US-APWR Fuel Assembly Planned Capacity Additions Possible Future Developments Potential Impact of the Ukrainian Crisis Nuclear Fuel Industries (NFI) Japan Ownership and Organization Fuel Fabrication Operations Current and Future Markets Japanese Market Foreign Markets NFI Fuel Designs Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis China Nuclear Fuel Corporation (CNFC) Corporate Structure and Manufacturing Facilities Fuel Fabrication Operations Yibin Fabrication Plant Baotou Fabrication Plant UxC

7 Fabrication Market Outlook - Jul 2016 Table of Contents Fuel Assembly Research & Development New Fabrication Facilities Other Fabrication-related Ventures Current and Future Markets Domestic Market Foreign Markets CNFC PWR Fuel Assemblies Comprehensive Fuel Offerings Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Conflict Industrias Nucleares do Brasil (INB) Ownership and Organization Fuel Fabrication Operations Resende Nuclear Fuel Factory (FCN) Current and Future Markets INB Fuel Assembly Designs Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Nuclear Fuel Complex India Ownership and Organization Fuel Fabrication Operations Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Kazatomprom Kazakhstan Ownership and Organization Fuel Fabrication Operations Ulba Metallurgical Plant Historical Background Joint Fabrication Ventures AREVA China General Nuclear Power Corporation Russia Ownership Share in Westinghouse Production Capacity Current and Future Markets Western Fuel Fabricators Japan China Planned Capacity Expansions Possible Future Developments Nuclear Fuel Ukraine Ownership and Organization Fuel Fabrication Operations Joint Venture with TVEL Other Joint Venture Possibilities Fuel Manufacturing Plant Iran Planned Capacity Expansions Possible Future Developments Potential Impact of the Ukrainian Crisis Mixed Oxide (MOX) Fuel Fabrication France United Kingdom Japan United States China Russia Forecast of Supply Capability Supply and Demand Analysis 189 Worldwide Supply And Demand Western European Supply and Demand North America/Taiwan Supply and Demand UxC 5

8 Table of Contents Fabrication Market Outlook - Jul 2016 Asian Supply and Demand Supply and Demand for VVER Reactors Other Supply Considerations Conclusions Global and Regional Market Analysis 201 BWR Fuel Markets Western European BWR Fabrication Market North American BWR Fabrication Market Asian BWR Fabrication Market Japan Taiwan PWR Fuel Markets Western European PWR Fabrication Market French PWR Fuel Market PWR Fuel Market in the Balance of Western Europe Framatome Units Siemens/KWU Units Westinghouse Units U.S. PWR Fabrication Market Babcock & Wilcox Units Combustion Engineering Units Westinghouse Units Asian PWR Fabrication Markets Japan Taiwan South Korea China Eastern European PWR (VVER) Fabrication Market Nuclear Fuel Fabrication Prices 220 Fuel Fabrication Price Background Fuel Fabrication Price Formation History of Fuel Fabrication Prices Initial Core and Reload Batch Prices Current and Future Fabrication Prices Utility Survey Responses Current Fabrication Prices Future Price Trends UxC Fabrication Price Forecast Current Prices Factors Affecting Future Prices Developments Retarding Price Increases Developments Promoting Price Increases The Future Path of Fabrication Prices U.S. Fabrication Price Projections Prices Outside the U.S Western Europe Japan China and South Korea VVER Fuel Non-LWR Fuel Fabrication Markets 236 Pressurized Heavy Water Reactor Fuel PHWR Overview PHWR Fuel Overview PHWR Fuel Fabricators Cameco Fuel Manufacturing (Canada) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services UxC

9 Fabrication Market Outlook - Jul 2016 Table of Contents GE-Hitachi Nuclear Energy Canada (Canada) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services KEPCO Nuclear Fuel (South Korea) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services China Nuclear Fuel Corporation (China) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services Fabrica de Combustibil Nuclear (Romania) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services CONUAR S.A. (Argentina) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services Nuclear Fuel Complex (India) Description of Fabrication Facilities Domestic and Foreign Markets Served Fuel Assembly Designs and Services Additional PHWR Fuel Related Companies CANDU Energy (Canada) CNL (National Research Universal NRU) TVEL Fuel Company (Russia) Kazatomprom (Kazakhstan) PHWR Fuel Supply and Demand Analysis PHWR Fuel Market Analysis Gas Cooled Reactor Fuel GCR Overview Springfields Fuels Ltd. (AGR) AGR Fuel Supply and Demand Light Water Cooled, Graphite Moderated Reactor Fuel LGR Overview LGR Fuel Overview LGR Fuel Supply and Demand Analysis Small Modular Reactor Fuel SMR Fuel Fabrication Overview Unique SMR Fuel Designs Summary Appendix A History of the Nuclear Fuel Fabrication Industry 262 The Early Years: U.S. Vendors and Facilities Western European Vendors and Facilities Japanese Vendors and Facilities Eastern European Vendors and Facilities Other Countries Period of Initial Consolidation: Diversifying Fuel Supplies to EDF in France Westinghouse BWR Fuel Activities Westinghouse s Foray into the VVER Fuel Market Recent Developments: Kazatomprom Rosatom/TVEL AREVA and Siemens AREVA and Mitsubishi Nuclear Fuel Global Nuclear Fuel UxC 7

10 Table of Contents Fabrication Market Outlook - Jul 2016 Westinghouse Appendix B Typical Fuel Fabrication Service Contracts 275 Appendix C UxC 2016 Fuel Fabrication Market Survey Sample 278 Appendix D Fuel Assembly Design, Manufacture & Performance 283 Nuclear Fuel Assemblies Boiling Water Reactor (BWR) Fuel Assemblies Pressurized Water Reactor (PWR) Fuel Assemblies Vodno-Vodyanoi Energetichesky Reactor (VVER) Fuel Assemblies Fuel Assembly Components UO 2 Pellets Fuel Cladding End Plugs Plenum Spring Spacer Grids BWR Water Rods/Channels BWR Tie Plates BWR Fuel Channels PWR Guide Tubes/Thimbles and Instrument Tubes PWR Nozzles The Fuel Fabrication Process Conversion of UF 6 Gas to UO 2 Powder Powder Processing and Preparation Pelletizing Fuel Rod Manufacture Construction of the Skeleton or Cage and Completion of the Assembly Quality Control and Assurance Vendor QC/QA Programs Utility QA Programs Nuclear Fuel Performance Operational Performance Cycle Length Discharge Exposure (Burnup) Nuclear Fuel Reliability Manufacturing Defects Debris Corrosion Pellet-Clad Interaction (PCI) Grid-to-Rod Fretting Assembly or Channel Distortion Failed Fuel Detection and Repair Historical Failure Rates Latest Available Performance Data VVER Performance Data Recent Fuel Failure Causes Driving to Zero Economic Issues in Fuel Performance Variation of Fuel Cost with Cycle Length Enhanced Operating Performance vs. Fuel Reliability Appendix E Fuel Fabricator Contact Information 311 The Mega-Vendors National and Regional Fuel Fabrication Suppliers Glossary UxC

11 Fabrication Market Outlook - Jul 2016 List of Figures List of Figures Figure 1. Plutonium Production During Irradiation of UO 2 Fuel Figure 2. Russia s REMIX Fuel Cycle Figure 3. UxC Nuclear Generating Capacity Forecast, Figure 4. UxC Base, High, and Low Case Nuclear Capacity Forecasts, Figure 5. Percentages of Different Operating Reactor Types Figure 6. New Reactor Startups and Total MWe Added, Figure 7. Percentages of New Reactor Types, Figure 8. Percentages of New Reactor Vendors, Figure 9. UxC Global LWR Fabrication Demand Forecast Cases, Figure 10. UxC Regional LWR Base Case Fabrication Demand Forecast, Figure 11. UxC Fabrication Demand Forecast by Fuel Type, Figure 12. AREVA ATRIUM 10XM Fuel Assembly Figure 13. AREVA AGORA H (left) and HTP Fuel Assemblies Figure 14. AREVA ATRIUM 11 Fuel Assembly Figure 15. GNF-A GNF2 Fuel Assembly Figure 16. GNF-A GNF3 Fuel Assembly Figure 17. Westinghouse SVEA Optima 2 and Optima 3 Fuel Assemblies with Cross Section Figure 18. Westinghouse NGF, CE16NGF, and AP1000 Fuel Assemblies Figure 19. Westinghouse TVS-WR Fuel Assembly Figure 20. TVEL Fuel Assembly Offerings Figure 21. TVEL VVER-440 TVS ARK Fuel Assembly (top) and RK-3 Assembly (bottom) Figure 22. TVEL TVSA-12 and TVS-4A Fuel Assemblies Figure 23. TVEL TVS-KVADRAT Fuel Assembly Figure 24. KNF PLUS7 (left) and ACE7 (right) Fuel Assemblies Figure 25. ENUSA 17x17 MAEF Fuel Assembly Figure 26. MNF 17x17 Fuel Assembly Figure 27. MNF US-APWR 17x17 Fuel Assembly Figure 28. NFI 9x9 BWR Fuel Assembly Figure 29. NFI 17x 17 PWR Fuel Assembly Figure 30. Chinese PWR Fuel Assemblies at CNFC s Yibin Plant Figure 31. CNFC s CF3 Fuel Assembly Figure 32. INB Fuel Assemblies at the Resende Plant Figure 33. Projected Worldwide LWR Supply, Figure 34. Worldwide LWR Fabrication Supply and Demand, Figure 35. Western Europe LWR Fabrication Supply and Demand, Figure 36. North American/Taiwan LWR Fabrication Supply and Demand, Figure 37. Asian LWR Fabrication Supply and Demand, Figure 38. VVER Fabrication Supply and Demand, Figure 39. Western European BWR Fabrication Market Shares Figure 40. North American BWR Fabrication Market Shares Figure 41. Western European PWR Fabrication Market Shares Figure 42. U.S. PWR Fabrication Market Shares Figure 43. Total LWR Nuclear Fuel Price Breakdown Figure 44. Utility Responses to Question on Future Fabrication Price Trends Figure 45. BWR Fabrication Price Forecast, Figure 46. PWR Fabrication Price Forecast, Figure 47. PHWR Fuel Fabrication Manufacturing Process Figure 48. PHWR Fuel Bundle Figure 49. PHWR Fuel Fabrication Supply and Demand, Figure 50. AGR Fuel Bundle UxC 9

12 List of Tables Fabrication Market Outlook - Jul 2016 Figure 51. AGR Fuel Fabrication Supply and Demand, Figure 52. RBMK-1000 Fuel Assembly Figure 53. LGR Fuel Fabrication Supply and Demand, Figure 54. HoltecSMR-160 Fuel Core Cartridge Figure 55. China HTR-PM TRISO Coated Particles and Fuel Spheres Figure 56. China s Pilot HTR Fuel Production Line Figure A-1. Evolution of the International LWR Fuel Fabrication Industry Figure D-1. Typical BWR Fuel Assemblies Figure D-2. Typical PWR Fuel Assembly Figure D-3. VVER-440 (left) and VVER-1000 Fuel Assemblies (right) Figure D-4. Typical Nuclear Fuel Pellets Figure D-5. Typical BWR Spacer Grid Figure D-6. The Fuel Fabrication Process Figure D-7. Diagram of the UO 2 Powder Production Process Figure D-8. Diagram of the Pellet Manufacturing Process Figure D-9. Typical Fuel Rod Figure D-10. Typical BWR (right) and PWR (left) Skeletons/Cages Figure D-11. International Discharge Burnups for BWRs, Figure D-12. International Discharge Burnups for PWRs, Figure D-13. U.S. Fuel Reliability, Figure D-14. International Fuel Reliability, Figure D-15. TVEL Fuel Performance Figure D-16. Comparison of U.S. Fuel Failure Mechanisms, vs List of Tables Table 1. Current and Future MOX Fabrication Plants Table 2. Reactor Units & Nuclear Capacities Anticipated by Country by Table 3. UxC Base, High, and Low Case Nuclear Reactor and Capacity Forecasts, Table 4. Operating Reactor Types Table 5. New Reactor Startups by Year, Table 6. New Reactor Types, Table 7. New Reactor Vendors, Table 8. UxC Global LWR Fabrication Demand Forecast Cases, Table 9. UxC Regional LWR Fabrication Demand Forecasts, Table 10. UxC Regional LWR Fabrication Demand Forecasts, Table 11. Survey Responses to Question on State of the Market Table 12. Worldwide LWR Fuel Fabrication Capacity in Table 13. Base Case UxC Fabrication Supply Capacity Forecast, Table 14. Number of European BWR Plants Supplied Table 15. Number of Western European PWR Plants Supplied* Table 16. Number of U.S. PWR Plants Supplied Table 17. Fabrication Price Projection, Table 18. Current Worldwide PHWR Fuel Fabrication Capacity Table 19. Comparative Data for Ten Leading SMR Designs Table D-1. BWR & PWR Fuel Rods and Structural Elements Table E-1. Mega-Vendor Fabrication Supplier Contacts Table E-2. National and Regional Fuel Fabrication Supplier Contacts Table F-1. Glossary of Terms UxC

13 Fabrication Market Outlook - Jul 2016 Introduction and Overview Introduction and Overview The Ux Consulting Company, LLC (UxC) is pleased to present the 2016 Fabrication Market Outlook (FMO) report, which is the tenth annual edition in this series. This year s report builds upon the significant enhancements made in previous editions as part of our ongoing effort to improve information exchange and understanding in the all-important global nuclear fuel fabrication marketplace. Five years after the devastating Fukushima accident, its implications are much clearer today than immediately following the disaster, although its ultimate impact still continues to evolve. On the demand side, Germany has made a firm commitment to shut down all of its operating reactors over the next decade. Belgium is currently committed to retire all of its units by the middle of the next decade as the country s reactor licenses expire and a number of the older Swedish units have been designated for retirement by 2020, however changes to Sweden s nuclear tax could result in extended operations of those reactors. Switzerland, which at one point appeared committed to follow Germany s lead and shut down all of its reactors in the near-term, will now retire one unit early and consider extending the operating licenses of its other reactors on a case-by-case basis, although no new plants will be authorized. A couple of the older French units will be shut down during the next few years and the current French energy policy calls for reducing dependence on nuclear generation, but the specifics of this plan still remain unclear. A number of U.S. reactors have been retired early and several other plants there face a similar fate as they deal with increased competition from low-priced natural gas. As we go to press, there are only two reactors operating in Japan. However, ten Japanese utilities have already applied for a total of 26 reactor restarts under new safety regulations that took effect in July 2013, and others may do so in the future. The total number of units to be returned to service and their schedules are unclear, although current Japanese policy is to limit nuclear generation to 20-22% of requirements as compared to the 30% that prevailed before Fukushima. On the positive side, after a brief post-fukushima hiatus, China has returned to its massive nuclear expansion. And, in the U.S., Watts Bar Unit 2 has been completed and is working its way towards commercial operation and four Westinghouse AP1000 units are currently under construction at the Vogtle and VC Summer plant sites. India also has plans for several additional units, and recently inked an agreement for up to six Westinghouse AP1000 reactors. The British government and Electricité de France (EDF) appear to be inching toward an agreement that will result in the construction of new units in the UK and Hitachi s Horizon and Westinghouse s NuGen projects could add additional plants in that country. And, there are plans for a large number of additional reactors in other parts of the world UxC 11

14 Introduction and Overview Fabrication Market Outlook - Jul 2016 In response to declining demand, the fabrication supply sector in Europe contracted following the closure of AREVA s Dessel, Belgium plant. At the same time, significant fabrication capacity expansions are currently underway in China and more are planned there as well as in India and South Korea. AREVA s financial woes of the past several years have culminated in a total reorganization of the company with its reactor and fabrication businesses being transferred to a new company that is majority owned by EDF. The transition is expected to be completed late this year or early in In what could prove to be a pair of watershed events, in 2014, four Lead Fuel Assemblies of Russian vendor TVEL s new PWR fuel design were loaded into Vattenfall s Ringhals 3 reactor in Sweden. This was followed in 2016 by the formation of a strategic alliance between TVEL and Global Nuclear Fuel-Americas (GNF-A) to license, market, and eventually manufacture the Russian fuel in the U.S. In the longer term, this could lead to greater competition for PWR reload fuel on both sides of the Atlantic. The crisis in Ukraine continues to fester with no end in sight. The geopolitical implications of the Russia-Ukraine dispute are well beyond the scope of this report, but it has resulted in the cancellation of the joint Ukrainian-Russian fabrication plant planned for Ukraine. Fallout from the crisis, including sanctions imposed on Russia by the U.S. and European Union, a loss of faith in Russia as a reliable supplier in energy markets, or some other event, could have a significant impact on the international fabrication market. Therefore, wherever appropriate in this report, we will address how we believe the Ukrainian crisis, as well as Russia s actions in Syria, might impact the greater fabrication industry. As we go to press, the United Kingdom has voted to exit the European Union. While this could possibly have ramifications for the international fabrication industry, it is far too early to draw any conclusions. The implications of how Brexit will affect international commerce still remain to be fully understood. All of these collective international issues, coupled with various other developments in the nuclear industry, in general, and the fuel fabrication industry, in particular, have suggested that there could be changes in worldwide fabrication markets. The interactions between buyers and sellers in the years ahead and our assessment of such changes are addressed throughout the FMO, where appropriate. As with previous editions, the primary focus of this FMO report is fuel fabrication for large light water reactors (LWRs) boiling water reactors (BWRs) and pressurized water reactors (PWRs) since these comprise the great majority of the nuclear plants currently in operation around the world and those planned for the future. The Russian VVER reactors installed in Russia, Eastern Europe, and other countries are, in fact, PWRs UxC

15 Fabrication Market Outlook - Jul 2016 Introduction and Overview There are also a number of pressurized heavy water reactors (PHWRs) operating in Canada and other nations, gas cooled reactors (GCRs) in the United Kingdom, and several light water cooled, graphite-moderated reactors (LGRs) in Russia (e.g., RBMK reactors). However, all of these regions/reactors represent unique fuel fabrication markets, which are covered at the end of this report. In the chapters that follow, we will address many of the diverse commercial, institutional, economic, and technical aspects of nuclear fuel, fuel fabrication, and the international fuel fabrication market. The report is intended to serve a variety of purposes: For those with little knowledge of nuclear fuel fabrication and its markets, the FMO serves as a primer, providing a solid background in various aspects of the industry and an understanding of how its markets function. For those knowledgeable in the fundamentals of fabrication, the FMO offers analyses of a variety of its aspects based on several decades of participation in the fabrication industry. And, for those who are actively involved in the industry as buyers or sellers of nuclear fuel assemblies, the FMO supplies additional up-to-date insights to assist in the improvement of existing nuclear fuel programs and in the development of new fabrication-related initiatives. What s New in the 2016 Report? In the 2016 Fabrication Market Outlook (FMO) report, we have maintained the organization and format consistent with UxC s other Market Outlook reports, and all of the discussions and analyses have been updated to reflect the events of the past 12 months. As part of the lead-up to this report, we have once again conducted a survey of international utility attitudes toward the fabrication market. This year s essay, entitled Is There MOX In Your Future? focuses on the status and future deployment (or not) of mixed-oxide (uranium oxide, UO 2, + plutonium oxide, PuO 2 ) fuel throughout the world. Once thought to be standard practice, MOX fuel utilization, while being advanced in some nations, has become highly controversial in others due to the rising cost of reprocessing and MOX fabrication, the difficulties in bringing new facilities on line in many areas, and the nonproliferation safeguards and other political factors associated with MOX fuel. Once again, we have classified the world s fabricators into three categories: the Mega-Vendors, large international suppliers to multiple markets; Emerging International Suppliers, those companies who are poised to expand beyond their current regional markets to directly challenge the Mega-Vendors in their principal markets; and the smaller regional and national suppliers. The market implications of the TVEL- GNF-A alliance are addressed wherever appropriate UxC 13

16 Introduction and Overview Fabrication Market Outlook - Jul 2016 Moreover, we include graphical representations of the leading fuel assembly designs for essentially every vendor. As suggested above, the continuing crisis in Ukraine could impact various aspects of the fabrication market. While the final effects will not be known unless and until a final resolution has been achieved, we have presented, wherever appropriate, our assessment of how the fallout from the conflict could affect nuclear fuel fabricators, their customers, and the global fabrication markets. This year s fuel fabrication demand projection is drawn from our proprietary UxC Requirements Model (URM), which, starting with UxC s own internal forecasts for nuclear power growth, calculates demand on a reactor-by-reactor, cycle-by-cycle basis. We continue to refine and improve the URM and believe the current version produces more accurate forecasts than in prior years. UxC s nuclear growth forecasts have been updated several times since Fukushima, and the fabrication demand projections used in this report reflect our very latest analyses in this regard. The focus of the report are analyses of the current and future markets for fuel for LWRs, i.e., BWRs and PWRs; however, we also include an updated and expanded discussion of the fabrication markets for non-lwr fuel (e.g., PHWRs, GCRs, and LGRs). Special efforts have been made to enhance our analysis of the PHWR fuel fabrication market, which represents about 11% of the world s reactors today. In addition, we have once again included a brief review of the potential fuel fabrication market for small modular reactors (SMRs), although the future of SMRs may not be quite as bright as it seemed a few years ago. Finally, as part of our continuing efforts to improve and enhance the analysis of the fuel fabrication markets, UxC made significant efforts to engage with global fuel fabricators, as well as their customers, to obtain the most accurate and up-to-date information possible. For this year s Utility Fabrication Market Survey, we received many excellent responses from utilities around the world, representing a total of 99 operating reactors. In preparing this edition of the FMO, we provided drafts of the appropriate sections of the report to each of the Mega-Vendors as well as to a number of the emerging and regional suppliers for their review and comment. When we received a response, we accounted for the vendors comments in preparing the final draft of the report. If any suppliers declined to comment, we assumed that the information we provided was accurate and it is included herein. We would like to express our sincere appreciation to all of the utilities and vendors whose cooperation was instrumental in the preparation of key sections of this report UxC

17 Fabrication Market Outlook - Jul 2016 Structure of Report Introduction and Overview This year s edition of the FMO continues our efforts to create a user-friendly text with each chapter containing clear and distinct information. The reader is encouraged to begin at Chapter 1, as there is intended to be a continuous and logical flow to the report; however, each individual chapter provides unique topical coverage that can also be considered independently from the rest of the report s contents. The report is structured as follows: Before launching into the detailed discussions, and to orient those without a great deal of experience in the fabrication industry, we begin with Chapter 1 Nuclear Fuel Fabrication Market Primer, which outlines the fundamental differences in terms of technical and commercial factors between the market for fabrication services and those for uranium, conversion, and enrichment. This year s in-depth topical essay in Chapter 2 Essay: Is There MOX In Your Future? provides a description of MOX fuel, its history and application in thermal and fast reactors, the status of MOX programs in various countries, and an assessment of its future around the world. Chapter 3 Reactor Developments and Demand Outlook begins our review of the fabrication market fundamentals with a look at current and future demand. This chapter presents UxC forecasts for nuclear power growth from our Nuclear Power Outlook (NPO) and the resulting fabrication demand projection using our UxC Requirements Model (URM). Supplementing the basic demand analysis, Chapter 4 Utility Procurement Approaches and Contracting Issues includes a discussion of the actions taken by utilities to fill their fuel requirements. It also presents the results of our utility survey. The supply side of the equation is addressed in Chapter 5 The World s Nuclear Fuel Fabricators. This chapter includes in-depth profiles of each of the world s LWR fuel suppliers, their production facilities, their products, the markets they serve, and additional items of interest. It also presents UxC s forecast of fuel fabrication supply over the next 15 years. Chapter 6 Supply and Demand Analysis combines all of the preceding discussions with a comparison of supply and demand for LWR fuel on a global level as well as in each of the principal geographic market segments. Since the market for fabricated LWR fuel is segmented both geographically and technically, each of these individual market segments is discussed and analyzed in Chapter 7 Global and Regional Market Analysis. Chapter 8 Nuclear Fuel Fabrication Prices discusses the factors affecting current and future LWR fuel prices and presents UxC s latest projections for both PWR and BWR fuel fabrication prices in different regional markets through UxC 15

18 Introduction and Overview Fabrication Market Outlook - Jul 2016 Finally, in Chapter 9 Non-LWR Fuel Fabrication Markets, we present a discussion of the unique fuel fabrication markets for pressurized heavy water reactors (PHWRs), gas cooled reactors (GCRs), and light water cooled, graphite-moderated reactors (LGRs). Small Modular Reactor (SMR) fuel developments are also addressed at the end of this chapter. The report also contains a series of appendices and a glossary, which provide background information and other useful items on the fabrication market. The following are found at the end of this report: Appendix A History of the Nuclear Fuel Fabrication Industry Appendix B Typical Fuel Fabrication Service Contracts Appendix C UxC 2016 Fuel Fabrication Market Survey Sample Appendix D Fuel Assembly Design, Manufacture & Performance Appendix E Fuel Fabricator Contact Information Glossary UxC