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Tough challenges overshadowed positive trend

The past year was tough for Studsvik - partly due to the economic situation, partly due to misjudgements of projects. At the same time we see clearly that the nuclear power industry is experiencing a long-term upward trend that is already benefitting several of our segments.

The weak economy had the greatest impact in the UK and the USA. The UK was affected by unease over reduced appro­priations to the Nuclear Decommissioning Authority (NDA), which with a budget of about SEK 30 billion constitutes the hub of this market. Many NDA-financed facilities are awaiting confirmation of long-term funding in spring 2010 before starting new decommissioning and waste projects. In the USA electricity consumption and prices fell, which caused the power companies to reduce costs, for example by waiting before sending waste for treatment.

However, Studsvik's losses in the UK cannot be blamed on the economy, even though that is delaying recovery. We underestimated the complexity of the large decommissioning projects we undertook at Sellafield. These projects have now been discontinued, resulting in losses of over SEK 20 million and major redundancy during the year. Despite this, the UK remains as a priority market for us. There is an ambitious­ program for management of historical waste, which together with extensive new construction plans forms the foundation of a vigorous market in the coming years. In addi­tion, in the fourth quarter we brought the metal­ recycling facility in Workington (MRF) into operation. This facility­, combined with our strong position in consulting services, makes us well-placed for the future.

In the USA our new business model for wet waste gained acceptance among customers. At the end of 2009 we had agreements with seven power companies, representing around half of the country's 100 or more nuclear power plants. However, it took time to get deliveries of waste under­ way under the new agreements, which put pressure on earnings. In the fourth quarter, the US Department of Energy ordered a THOR facility from our part-owned company THOR Treatment Technologies (TTT).

Global Services, Sweden and Germany, accounting for a total of over 70 per cent of the Group's sales, continued to grow. The growth is based on the positive trend for nuclear­ power around the world. Global Services is the segment that first feels the positive currents from new construction projects and modernization. Advanced software and materials testing are important components when developing new reactors and fuel types. In 2009 Global Services became­ our most profitable and fastest growing segment.

Another area of strong development is qualified nuclear engin­eering services, which we offer with different specializations in all segments. Income from consulting services is increasing by about SEK 50 million annually, and was in 2009 about SEK 200 million. Examples of projects in Sweden­ are studies for SKB's final repository in Forsmark and development of a new reactor generation. In Germany, among other things our engineers are occupied with characterization of waste, health physics investigations and safety analyses. In 2009 our German subsidiary also established a consulting branch in France with about 40 employees. In the USA the focus is on further development of our patented THOR technology on behalf of customers.

The European waste operations in segment Sweden met with great interest in treatment of large components. Studsvik has treated both German and Swedish steam generators effectively, economically and with environmental responsi­bility, which opens new markets. During the year we made an agreement with the Canadian company Bruce Power to treat 32 steam generators for them over the next eight years.

In summary, in 2009 Studsvik struggled with short-term challenges in a market that is undergoing long-term growth. Towards the end of the year we succeeded in the challenge of winning customers for our new business model­ for wet waste in the USA. However, it will not be until the spring season of refuelling and maintenance outages that we will be able to assess the size of the waste volumes that the agreements will bring in 2010. In the UK the risk level of our operations has fallen considerably, but we are entering 2010 with a thin order book which it will take time to build up in the prevailing market. The other three segments all have healthy order books and we are working long-term there to further develop our services and increase effectiveness.


Nyköping in February 2010 

Magnus Groth


Magnus Groth
Koncernchef och VD Studsvik AB


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