Possible defects at French reactor lift European power prices

By Forrest Crellin

PARIS (Reuters) -European power contracts jumped on Wednesday on concerns France might have to reduce its nuclear output after the industry regulator said it had identified "hints" of possible stress corrosion in a reactor.

The ASNR watchdog said testing had highlighted possible defects in the Civaux 2 reactor, but that there was no confirmation of corrosion at this stage and more testing was required.

The price for front-year baseload power contracts in France climbed to a four-month high in early trading before falling back to 65.80 euros ($75.38) per megawatt hour in the afternoon.

Operator EDF dealt with stress corrosion cracks in the same reactor less than three years ago, when corrosion in multiple reactors nationwide forced nuclear output in France to a 34-year low and sent prices skyrocketing.

A spokesperson for EDF said an inspection was underway at Civaux 2 as part of annual maintenance and the utility did not yet have the results.

Benchmark European front-month gas contracts were also higher, up 2.3% at 35.58 euros/MWh.

Risks to the French nuclear fleet were the main driver for gas demand on Wednesday, a trader told Reuters.

Reports of the possible defects at Civaux 2 were "risking a revival of tensions on Europe's power market," analysts at DNB said.

Mind Energy analysts attributed the rise in European gas prices and the European front-year baseload contracts to the same news.

Kpler analyst Hazma Aourach played down the risks and said EDF was now better placed in terms of experience and manpower to deal with any renewed stress corrosion issues.

($1 = 0.8729 euros)

(Reporting by Forrest Crellin in Paris, Nora Buli in Oslo and Vera Eckert in Frankfurt. Editing by Rachna Uppal and Mark Potter)