Finland Puts New Nuclear Plant Plan in Doubt

Finland's economy minister has rejected an application from power utility Teollisuuden Voima (TVO) to extend the permit for a new nuclear reactor in the west of the country, throwing the project into doubt.

Minister Jan Vapaavuori instead conditionally backed another nuclear project, Finnish-Russian company Fennovoima's plan to build a new plant in Pyhajoki, in northern Finland, in a move that is likely to mean the country's five-party government will lose a small coalition partner, the Greens.

Finland had approved both new reactors in 2010 as part of efforts to increase its self-sufficiency in power generation and reduce electricity prices, but the projects have both since faced troubles, prompting reviews of their permits.

TVO had requested a five-year extension to the Olkiluoto 4 reactor project because it was dealing with delays and overruns at its predecessor, Olkiluoto 3, and it did not want to build two projects worth billions of euros at the same time.

Olkiluoto 3, built by an Areva-Siemens (SIEMENS.NS) consortium and set to be the country's fifth reactor, is not expected to come onstream until late 2018 - almost a decade later than originally planned.

"Due to the uncertainties regarding Olkiluoto 3, it is impossible to evaluate whether TVO could proceed with the project (Olkiluoto 4) even with an extended schedule," economy minister Vapaavuori said.

TVO, whose biggest owners include paper companies UPM-Kymmene and Stora Enso as well as utility Fortum, said it was surprised and disappointed. It is still allowed to submit the construction plan for the Olkiluoto 4 to the government by next summer.

"We will have to evaluate this situation now, this was a very surprising decision... This is volatile energy politics and, from the economy perspective, a strange move to dismiss an investment of billions of euros," said Lauri Virkkunen, the chief executive of Pohjolan Voima, which represents 60 percent of TVO's ownership.

Nod for Russian Cooperation
Meanwhile Vapaavuori backed the general permit for the northern plant planned by Fennovoima, which will be 34 percent owned by Rosatom, Russia's state-owned nuclear energy corporation. However, he said the consortium must first attract new local investment to get indigenous ownership up to at least 60 percent from 50 percent currently before it can get the go-ahead for the plant's construction.

Fennovoima has struggled to find new investors to replace several withdrawals, and the Ukraine crisis has weakened the general mood in Finland towards collaborating on such a project with Russia.

"Politically, this is not the best moment for dealing with this issue ... But we will make decisions when the issues are on table, not when the time is politically most comfortable," Vapaavuori said.

The Green Party responded by saying it will exit the coalition if a government meeting on Thursday officially proposes that parliament should approve Fennovoima's permit.

Right-leaning Prime Minister Alexander Stubb told Finnish media it was likely Fennovoima's general permit will be supported by the government.

Should the Greens leave, the coalition would still have a small majority in parliament. Finland's next general election will be held in April, and the exit is not expected to cause too much damage, politically.

Last year Finland's existing four nuclear plants produced some 22 terawatt-hours of power, about a quarter of the country's overall electrical energy consumption.

"In the worst case, it could be that neither project (Olkiluoto 4 or Fennovoima) will proceed ... In that case, the next government must evaluate what to do with the energy policy," Vapaavuori said.

(By Jussi Rosendahl; Editing by Mark Potter and Greg Mahlich)