April 1, 2015 / 11:47 AM / 4 years ago

Breakthrough in Areva-TVO nuclear dispute seen this year - sources

* Areva camp says intermediate award possible in coming months

* TVO downplays prospect of that, says may raise its claim

* Arbitration case complicates Areva’s partner search

* Areva makes no provisions based on defence team’s confidence

* Areva team led by lawyer who won record claim for Yukos

By Geert De Clercq

PARIS, April 1 (Reuters) - A legal battle between Franco-German nuclear consortium Areva-Siemens and its Finnish customer Teollisuuden Voima (TVO) involving billions of euros in damage claims over a reactor project could see a breakthrough this year, sources close to Areva said.

Years of delays and cost overruns at the Olkiluoto 3 nuclear plant Areva and Siemens are building in Finland have developed into a bitter row between supplier and customer. An arbitration case was initiated by Areva-Siemens in 2008.

For its part, TVO has played down the likelihood of an intermediate ruling this year, and said it may even increase its claim. All sides agree a final settlement is years away.

But Areva sources say arbitrators at the International Chamber of Commerce (ICC) could rule on some areas of the dispute in coming months.

“There could be a partial and intermediate award in the coming months,” a source close to Areva said.

That could offer a pointer towards the final outcome and clarify the financial position of loss-making Areva. Areva was tipped into crisis after the 2011 Fukushima disaster led to an industry downturn, and strategic errors left it searching for a partner to restore its balance sheet.

Separately, a senior legal source in the Areva camp said there could be a partial ruling about certain issues in the case later this year. The source would not give any more precise timing or say which issues there could be rulings on.

But TVO Deputy Chief Executive Risto Siilos insists “the big picture in the arbitration is that it could take several years until a final decision is made about the plant’s delay and costs.”

“There is nothing in our sight for the near term that would have a major impact to this,” he said, adding “it is totally possible that TVO will update its claims during the arbitration”.

In October, Areva and Siemens raised their claim against TVO to 3.5 billion euros ($3.8 billion) from 2.6 billion after TVO raised its counter-claim to 2.3 billion euros from 1.8 billion.

The claims make it hard to value 87 percent state-owned Areva - which posted a 4.8 billion euro loss for 2014 - and complicates a possible alliance between the group and utility EDF.

Areva too has room to revise its 3.5 billion euro claim upwards, as the existing amount only relates to events up to June 2011, but the firm declined to comment on that possibility. TVO’s claim covers the period up to the end of 2018.

BUILDING COSTS BALLOON

Eager to sell the first of its new EPR reactor model, Areva’s former chief executive Anne Lauvergeon had offered TVO a turnkey contract for a fixed price of 3 billion euros. But building costs have ballooned to nearly 9 billion euros, and Areva argues TVO’s inflexibility is partly to blame.

TVO - whose owners include paper companies UPM and Stora Enso as well as utility Fortum - said its demands are based on its view that planning and execution at Olkiluoto 3 have not been sufficient to keep the project on schedule.

New Areva Chief Executive Philippe Knoche, who ran the Olkiluoto 3 project from 2006 to 2009, told parliament in March that a final ruling is several years away.

This could be well after 2018 - when the reactor is expected to come on stream after a delay of nearly a decade. Construction started in 2005.

For Areva, an intermediate ruling that goes its way could support its decision not to provision for TVO’s claim. The legal source said the Areva defence team’s written assessment of the case provides the legal base for Areva and its auditors to not book provisions for the claim.

In July 2012, the ICC’s Court of Arbitration handed down a first partial judgment, ordering TVO to release 100 million euros owed to the Areva-Siemens consortium, which Areva said was withheld in contravention of contractual provisions.

Areva’s legal team is led by Shearman & Sterling’s Emmanuel Gaillard, who won a record $50 billion for shareholders of former Russian oil firm Yukos in a The Hague arbitration court case against Russia. ($1 = 0.9316 euros) (Additional reporting by Jussi Rosendahl in Helsinki; editing by Susan Thomas)

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