Committee on Budget and Committee on Budgetary Control

REPORT

of a Joint delegation of the Committee on Budgets and the Committee on Budgetary Control to France

(ITER in Cadarache)

16 - 18 May 2011

(Courtesy: ITER organization)

(Courtesy: Christian Michel, Marc-Oliver Pahl, Sophie Spiteri)

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INDEX

1. ............................................................................................................ 4 Final programme2. ......................................................................................................... 9 List of participants3.

.................................................................................................. 11 Conclusions of the European Parliament Joint BUDG- CONT delegation to ITER in Cadarache

4. ............................................................................................... 13 Principle presentations

4.1. .......................................................................... 13

Presentation by the Director-General of the international ITER project Prof. Osamu Motojima

4.2. .......... 23

Presentation by the Director of the European Joint Undertaking for ITER and the Development of Fusion Energy Mr Frank Briscoe

4.3. ......... 33

Presentation by the Deputy Director General for Research and Innovation of the European Commission Mr Rudolf Strohmeier

5. ................................................................ 38 Index of documents and their sources6. ................................................................................................................... 41 Press review

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1. Final programme Monday, 16 May 17:00 – 19:30

Opening meeting with ITER, Fusion for Energy and Commission representatives Venue: Grand Hôtel Roi René, boulevard du Roi René 24, 3100 Aix-en-Provence

17:00 - 17:10

Welcome address by the Co-Chairs of the EP delegation, Ms. Anne Jensen (Committee on Budgets) and Mr Bart Staes (Budgetary Control Committee)

17:10 - 17:50

Presentation by the Director-General of the international ITER project, since 2010 Prof. Osamu Motojima (from Japan) (Presentation on the scientific concept and the overall governance and financial structure of ITER and the cooperation between the international partners of ITER: EU, US, Japan, China, Korea, Russia and China), and discussion

17:50 - 18:30

Presentation by the Director of the European Joint Undertaking for ITER and the Development of Fusion Energy ("Fusion for Energy", F4E), Mr Frank Briscoe (Presentation of the governance and financial structures of F4E, the possible evolution of the EU budget for ITER and the financial control mechanisms in place), and discussion

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18:30 - 18:50

Presentation by the Chairman of the Governing Board of F4E, Prof. Carlos Varandas (Presentation of the role of the Governing Board serving as supervising body of F4E consisting of representatives of Euratom (the Commission), all 27 member states and Switzerland, and the role of the Executive Committee of F4E, bringing together 13 people who represent the Governing Board and its activities, especially concerning procurement contracts and grant; the mandate of both bodies and of Prof. Varandas will end June 2011), and discussion

18:50 - 19:30

Presentation by the Deputy Director General for Research and Innovation of the European Commission, Mr Rudolf Strohmeier (Presentation of the Energy research priorities, the role of Fusion research, the reasons for the increased financing needs of ITER and the development of the governance, financial and internal control structures), and discussion

20:15

Reception and official dinner offered by Mr Hugues Parant, Préfet de la Région Provence Alpes Côte d'Azur (PACA) and the French High Representative for ITER, Mr Bernard Bigot, Musée Granet, Place Saint Jean de Malte, 13100 Aix-en-Provence

The members were also welcomed by a representative of Ms Maryse Joissains, Mayor of Aix-en-Provence

Tuesday, 17 May 10:15 - 11:30

The delegation will be welcomed by Roger Pizot, Mayor of Saint Paul lez Durance, the small town on which territory the Cadarache site is located. Short welcome addresses by the Director-General of the international ITER project, Prof. Osamu Motojima , and the French High Representative for ITER, Mr Bernard Bigot Visit of the construction site of ITER in Cadarache (Excavation hole for the ITER Tokamak reactor, future ITER headquarter)

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11:30 - 13:00

Visit to the neighbouring French nuclear and fusion energy research centre at the "Commissariat à l'énergie atomique et aux énergies alternatives" (CEA) in Cadarache Welcome address by the director of the "Agence ITER France" within the "Commissariat à l'énergie atomique et aux énergies alternatives" (CEA), Mr Jérôme Paméla , and the Head of the Institut de recherche en fusion magnétique (IRFM), Mr Gabriel Marbach afterwards a small experimental fusion reactor on laboratory level ("Tore Supra") will be visited

15:30 - 18:30

Meetings with ITER organisation, Fusion for Energy and representatives from France Venue: Grand Hôtel Roi René, Aix-en-Provence

15:30 - 16:40

Audit Presentations on the operation of budgetary implementation systems and procedures: - two members of the Independent audit committees: Mr Brian Gray, EU Member of the Financial and Audit Board of ITER, and Mr Stuart Ward, Chairman of the F4E Audit Committee, - the internal auditors: Ms Sandy Holt for ITER and Mr Regis Durand for F4E, - the ITER Head of Department of Administration, Mr Rich Hawryluk, - Mr Frank Briscoe as Acting Head of Administration and F4E director

16:40 - 17:00

Procurement and Grants Presentations of international contractors of the ITER project: - Bernard Blanc (Assystem) and Christophe Junillon (Atkins),

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representatives of the Consortium ENGAGE (composed of Assystem France SAS (France), WS Atkins International LTD (UK), IOSIS Industries (France), Empresarios Agrupados Internacional SA (Spain)) to which the contract for the provision of architect engineering services has been awarded, - Mr Aitor Echeandia; Business Manager ELYTT ENERGY/NEUREUS TECHNOLOGIES, a Spanish engineering SME that has been awarded contracts both as part of consortium and in direct with F4E. The scope of the contracts covers various engineering support activities.

17:15 - 17:45

Agence ITER France Presentation of the director of the "Agence ITER France", Mr Jérôme Paméla (Presentation of the state of realisation of the French contributions to the ITER project), and discussion in the presence of the Vice Director General of ITER, Mr Carlos Alejaldre

17:45 - 18:30

Exchange of views with regional and local representatives Short interventions regional and local representatives (Presentation of regional and local discussions about the overall impact of the ITER project on the region) 1. Préfecture (Representative of the State in the Region and the Départment): - Mr Gilles Barsacq, Secrétaire Général pour les affaires régionales, Préfecture de la Région Provence Alpes Côte d'Azur (PACA), Marseille - Mr Yves Lucchesi, Sous Préfet of Aix-en-Provence - Mr Perdiguier, Chef de la division de Marseille de l'Autorité de Sureté Nucléaire (ASN) 2. Representatives of the Conseil Régional de Provence Alpes Côte d'Azur (PACA) (Regional Government and Parliament): Ms Annick Delhaye, 2nd Vice President of the Regional Council of PACA au développement soutenable, à l'environnement, à l'énergie et au climat 3. Representatives of local groups and of the municipalities close to Cadarache: Presentation of local discussions on the environmental impact and the risk assessment of ITER, supporting and critical voices - Mr Cyril Fourcaud, Secretary General of the Commission locale d'information (CLI) Cadarache, and Mr Hannecart, representative of the 'associations' in CLI - Mr Maurice Wellhoff, Président du Comité de Défense de l'Environnement de Jouques et Peyrolles and CLI member, and Ms Isabelle Taitt, Collectif Antinucléaire 13 (local ngo)

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19:30 - 22:00

Informal reception with local and regional representatives, representatives of ITER, F4E and the Commission Venue: Hôtel Le Pigonnet, 5 Avenue du Pigonnet, 13090 Aix-en-Provence Continuation of the exchange of view with local and regional representatives on a bilateral basis

Wednesday, 18 May

Meetings at the Grand Hôtel Roi René, Aix-en-Provence

9:00 - 10:15

Wrap-Up meeting with Fusion for Energy and Commission representatives - Director of Fusion for Energy (F4E), Mr Frank Briscoe - Director General for Research and Innovation of the European Commission, Mr Robert-Jan SMITS

10:15 - 11:00

Internal meeting of the EP delegation to come to preliminary joint conclusions

11:00 - 12:00

EP Press conference with the support of the EP Information office in Marseille Potential Participants: - Ms Anne Jensen, delegation co-chair (DK, ALDE group, BUDG Committee) - Mr Bart Staes, delegation co-chair (B, Green/EFA group, First Vice President

of CONT Committee) - Mr Damien Abad (F, EPP group, BUDG Committee) - Mr Jens Geier (D, S & D group, BUDG and CONT Committee)

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2. List of participants

MEMBERS OF THE BUDG COMMITTEE (7)

EPP (3)

Mr Damien ABAD France (hors quota) Ms Monika HOHLMEIER (also substitute member CONT) Germany

Mr Giovanni LA VIA Italy

S&D (2)

Mr Jens GEIER (also full CONT member) Germany Ms Edith HERCZOG (also substitute member CONT, full member of ITRE) Hungary

ALDE (1)

Ms Anne JENSEN (Co-Chair of the delegation) Denmark

Greens/EFA (1)

Ms Isabelle DURANT (also Vice President of the European Parliament) Belgium

MEMBERS OF THE CONT COMMITTEE (5)

EPP (1)

Ms Ingeborg GRÄSSLE (also full BUDG member) Germany

S&D (1)

Ms Inés AYALA SENDER Spain

ALDE (1)

Mr Jan MULDER (also substitute BUDG member) Netherlands

Greens/EFA (1)

Mr Bart STAES (Co-Chair of the delegation) Belgium

GUE/NGL (1)

Mr Søren Bo SØNDERGAARD Denmark

EP STAFF (13)

SECRETARIATS OF THE COMMITTEE ON BUDGETS & BUDGETARY CONTROL (4)

Ms Anne VITREY Director Budgetary Affairs Ms Urszula MOJKOWSKA CONT Secretariat Mr Marc-Oliver PAHL BUDG Secretariat Ms Martina STOLARIKOVA CONT Secretariat

SECRETARIATS OF POLITICAL GROUPS (7)

Mr Lutz DOMMEL Political advisor ALDE-BUDG Mr Michel RAQUET Political advisor Greens/EFA-BUDG Mr Jonas KRAFT Political advisor EPP-CONT

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Ms Maggie COULTHARD Political advisor S&D-CONT Ms Petra SOLLI Political advisor ALDE-CONT Mr Hendrik PRUMMEL Political advisor Greens/EFA-CONT Mr Andreas WEHR Political advisor GUE/NGL-CONT

Representatives of EP Information offices Marseille and Paris (2)

Ms Maria Gracia CAVENAGHI-SMITH Head of Marseille Office Mr François ARNAUD Marseille Office

MEPs from other committees as 'special guests' (3)

Mr Luc BENNAHMIAS (ALDE) MEP for the South-East region of France

Mr Werner KUHN (EPP) MEP from Germany

Ms Michèle RIVASI (Greens/EFA) MEP for the South-East region of France

Accompanying Commission delegation (8)

Mr Robert-Jan SMITS Director General for Research and Innovation (17 May in the evening -18 May)

Mr Rudolf STROHMEIER Deputy Director General for Research and Innovation (until 17 May)

Mr Raffaele LIBERALI Director for Energy, Directorate General for Research and Innovation

Mr Yvan CAPOUET HoU ITER, Directorate General for Research and Innovation

Ms Rosa CIOTOLA Assistant to the Director for Energy, Directorate General for Research and Innovation

Ms Francesca CERVELLI Coordonnateur des relations avec le Parlement Européen, Directorate General for Research and Innovation

Mr Charles GROUTAGE HoU Internal policies, Directorate General for Budget

Mr Cyril ROBIN-CHAMPIGNEUL Head of Commission Representation in Marseille

INTERPRETERS (8)

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3. Conclusions of the European Parliament Joint BUDG- CONT delegation to ITER in Cadarache

The members of the European Parliament delegation have visited the ITER site in Cadarache/France and have met the management and auditors of both ITER and Fusion for Energy (F4E), the local authorities, members of the scientific community involved in the project, civil society representatives and contractors of F4E. The objectives of the delegation were to assess the financial needs of the project in the forthcoming period and to evaluate the state of development of the project, its cost effectiveness as well as its past and potential shortcomings. The following preliminary conclusions are submitted to the attention of BUDG and CONT Committee members as an outcome of the delegation1: The delegation - Considers that for the European Parliament ITER is a project with a clear European added-value, with important spill-over perspectives in terms of research and innovation; - Takes the view that the ITER research project is valuable as one of the different possible future energy sources for Europe; and that its financing should not be discontinued; - Observes that the project is now under way; welcomes the significant changes of the governance, control and audit structures of ITER and F4E over the last 12 months; expects the commitments of the ITER and F4E management vis-à-vis the Parliament to be implemented in due time; expects continued review of all processes with a view to creating a stable decision making environment of a cost effective management; - Acknowledges the high degree of support for the ITER project and commitment by the French authorities, at national and local level; nevertheless is aware that there are open questions and possible reluctance amongst citizens about the projects; recommends the French authorities to ensure a proper consultation of the local population; - Considers that the magnitude and the past severe shortcomings of the ITER project calls for close scrutiny from the European Parliament in its capacity of budget authority and discharge authority. Based on the EU share of 45% of the overall financing, reiterates the need for prior consultation of the Parliament before any future additional commitment on the international level; acknowledges the fact that there are open questions - Suggests the relevant Committee to call on the Council to resolve the 'flexibility debate' regarding the budget and the MFF without delay, and to provide certainty to the ITER project finances and end the current uncertainty about the research and human resources aspects; - Recommends that, on the basis of the overall cost to be agreed [of the 6,6 billion EUR ITER baseline for the construction phase] , the funding should be ring fenced in a specific envelope both in commitment and payment appropriations in order to guarantee the funding for ITER without jeopardising other EU priorities like the 7th Framework programme for Research; - Recommends that the funding should be released once the following criteria are met:

regular information to the Parliament and strong guarantees of transparency,

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a clear roadmap of the project, including objectives and milestones, including ex-ante assessment and ex-post conformity checks

a re-evaluation of the cost on the basis of the results of the stress test and periodically thereafter,

regular reports on the project's financial needs, especially in the light of design modifications, raw material costs increases and difficulties encountered by the other ITER Parties,

alignment of F4E financial regulation with the position of the European Parliament expressed in the discharge report and the recommendations of the Court of Auditors, expressed in its opinion No 4/2008;

full transparency and access to internal audit documentation.

1 The delegation members of the Greens/EFA Group do not agree with these conclusions, because they are of the opinion that the ITER project will not produce any electricity on the grid and will eat up taxpayers money for decades that could otherwise be spent on a rapid shift of the economy towards a sustainable energy efficient renewables based economy. Stopping ITER will be a more economically, budgetary and environmentally sound approach. After the delegation the GUE/NGL delegation member expressed its reservations to the conclusions.

4. Principle presentations

4.1. Presentation by the Director-General of the international ITER project Prof. Osamu Motojima

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14

15

16

17

18

19

20

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4.2. Presentation by the Director of the European Joint Undertaking for ITER and the Development of Fusion Energy Mr Frank Briscoe

EP visit to Cadarache, 16-18 May 2011

F4E Cost Estimates and Management Improvements

Dr. Frank Briscoe, Director ad interim, Fusion for Energy

Slide 2

Contents

• Background

• Evolution of Cost Estimates

• Improvements to F4E Structure

• Improvements to Project Processes

• Improvements to Financial Management

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Slide 3

Fusion for Energy (F4E) has three objectives:

1. Provide Europe’s contribution to the ITER fusion energy project

2. Implement the Broader Approach (BA) agreement, a collaboration between Europe and Japan on fusion projects; JT-60SA, IFMIF, IFERC

3. Prepare for the construction of a demonstration reactor (DEMO)

• The first two objectives are based on obligations in international agreements signed by Euratom; the third objective is intended tobuild on the knowhow gained from ITER and BA for the long term

• During the construction of ITER until the end of 2019, F4E is mostly focussed on the first objective, in particular the supply of the components listed as EU responsibility in the ITER Agreement

BackgroundFusion for Energy Objectives

Slide 4

Example of Procurement SharingN.B. there are 85 procurement packages in total

PACKAGE kIUA ALLOCATION REMARKS

1.1

Magnet

Toroidal Field Magnet Windings

1A 85.2 1A for 10 TF (including 1 prototype) and 1B for 9 TF (including 2.5 kIUA for fabrication verification)

EU=100%

1B 82.3 JA=100%

Toroidal Field Magnet Structures

2A 51.4 90% Fabrication of whole structures by JA and Pre-compression ring (0.6 kIUA) by EU. Final assembly of 10 TF coil cases by EU (10%)

EU=10%, JA=

2B 47.7 JA=100%

Magnet Supports 2C 22.85 CN=100%

Poloidal Field Magnet 1 & 6

3A 13.6 RF=50% PF1 by RF and PF6 by EU EU=50%,

Poloidal Field Magnet 2 to 5

3B 33.6 EU=100%

Correction Coils 3C 2.6 CN=100%

Central Solenoid Magnet

4A+4B

39.6 US=100%

Feeders 5A 26.15 CN=100%

Feeders Sensors 5B 18.05 FUND=100%

Toroidal Field Magnet Conductors

6A 215 25%,

RF=20%, CN=7%, KO=20%, US=8% See Note-1

EU=20%, JA=

Central Solenoid Magnet Conductors

6B 90 JA=100%

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Slide 5

Key European Technologies

Slide 6

Evolution of the Cost Estimates for ITER Construction

(all figures in terms of M€ 2008 to ease comparison) Original Estimates 2001

(pre‐ITER Team and Commission)

New Estimates 2008; updated for F4E Governing 

Board in March 2010(F4E and IO)

Present Situation following interactions with Commission and 

Council in 2010

European in kind contributions to ITER construction, of which 1491 4065

Direct in kind contributions 1491 3945

Design completion and ITAs 120

European cash contributions, of which 947 1385

To IO (R&D,  IO procurements and IO running costs) 582 984

To Japan (transfer of procurement responsibilities) 365 365

To IO for their part of Test Blanket Module Programme 36Additional costs for ITER construction, of which 490

Transportation of components 110

Additional F4E activities (Technology for ITER) 45

Additional Direct Investments (ADIs) 335

ITER Total Construction Costs (without contingencies) 2438 5940 5870F4E contingency for ITER construction 493 0

F4E contribution to IO contingency 170 80

ITER Reserve 244ITER Total Construction Cost (with contingencies) 2682 6603 5950

Additional technology, of which 513 239 239

F4E part of Test Blanket Module Programme 281 175 175

Other Technology (BA and DEMO) 64 64 64

IFMIF construction 168 0 0

F4E Administrative Costs (mainly staff) 299 411 411

F4E GRAND TOTAL (with contingencies) 3494 7253 6600

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Slide 7

Evolution of the Cost Estimates:Reasons for cost increases

1. Commodity inflation has been higher than general inflation

2. The 2001 design was generic – now adapted to Cadarache

3. The 2001 design had significant risks – now mitigated by a number of additional direct investments

4. The 2001 design was not complete – now includes ‘missing items’

5. The increase in the number of parties from 3 to 7 --> an increase in the splitting of components between parties --> an increase in the interactions between the parties --> an increase in the number of staff in IO, F4E and other DAs

6. More design work had to be done on points (2) to (4) above

7. The start-up of IO, F4E, etc. has taken 3 additional years

Slide 8

Evolution of the Cost Estimates:Robustness of estimates

• The cost estimates have been reviewed by independent bodies, both the F4E cost estimates and the IO ones

• The costs have now stabilised; the main increases were identified in 2008 and included in the 2008 cost estimates

• The actual procurement contracts placed so far (100 contracts over 1 Meuro representing about 25% of the EU in kind contribution) are in line more or less with the cost estimates

• The other parties have experienced similar degrees of increase, which increases confidence in our own figures

• The project is more advanced today than in 2008; although the risks have been reduced, they will continue to be monitored for the remaining stages of construction

• The absence of any contingency for F4E work implies that every future increase will have to be offset by a saving

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Slide 9

Evolution of the Cost Estimates: New and Original Commitments

Slide 10

Evolution of the Cost Estimates: New Commitments and Payments

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Slide 11

Interactions with Governing Board, Commission and Council in 2010

• In March 2010, F4E proposed a new cost estimate of 7.253 Beuro to its Governing Board, including a contingency of 663 Meuro (as detailed on slide 4)

• The Governing Board, and subsequently the Commission and the Council accepted the need for a substantial increase but removed the contingency leaving a total of 6.6 Beuro

• At the ITER Council in July 2010, the parties agreed the currentschedule for ITER construction; in particular the target date for first plasma of November 2019

• If F4E is to achieve this schedule, a large part of the increase is needed in 2012 and 2013 - additional commitment appropriations of 1.3 Beuro (and the corresponding payment appropriations)

Slide 12

Interactions with Governing Board, Commission and Council in 2010

• In accepting the need for a cost increase, the Council imposed some conditions. In particular, it asked F4E to make proposals for:

a. Cost Containment

b. Improved F4E Structure

c. Improved Project Processes

Proposals were made to the GB in October 2010 and are being implemented

• At the same time, external and internal audits had shown that the F4E Financial Management also needed to be improved. This too is being addressed through improvements to structure and processes

• In addition the Council asked the Commission in consultation with the Member States to make proposals for Improved Governance – a Governing Board Working Group is developing these proposals

• The Council also asked F4E to appoint an independent assessor – the tender is in progress

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Slide 13

Cost Containment (at ITER level)

• ITER is a collaboration between 7 international parties with many interfaces and dependencies between the parties and the IO

• ITER Construction is a PROJECT; the scope, schedule, cost and risk are intimately linked, i.e. less cost = less scope or more risk

• The IO is the ‘design authority’ responsible for the performance of the machine and achievement of the project specification - “The device should achieve extended burn in inductively driven plasmas with the ratio of fusion power to auxiliary heating power, Q, of at least 10 (Q ≥ 10) for a range of operating scenarios and with a duration sufficient to achieve stationary conditions…..”

• IO would like to have big margins; in contrast, the parties would like to minimise the cost. A sensible balance needs to be found

• IO has held 2 ITER-wide exercises in past year to contain cost and has found significant savings while avoiding unacceptable risks

Slide 14

Cost Containment (at F4E level)

A number of actions are also being pursued at the F4E level:

• As noted on the previous slide, work with IO and the other DAs to avoid further cost increases and/or to find cost savings

• Make more efforts to develop a competitive market situation and then to maintain more competition during the tender process by optimising the choice of selection criteria and contractual terms

• Work with suppliers to find savings, e.g. to accommodate their ideas for easier fabrication

• Improve performance reporting/monitoring/governance

• Re-build contingency when possible and resist the urge to use

Over the past year, F4E has performed its work without affecting the overall cost estimate, i.e. increases have been offset by savings

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Slide 15

Improved F4E Structure, being implemented Nov 2010 – Dec 2011

• The ITER work was re-organised from 1 Nov 2010 into a set of 8 ‘project teams’, each team having responsibility for the delivery of a defined part of the EU contribution to ITER and bringing together the previously separate technical and procurement staff

• Staff have been recruited over the past year with special regardto experience of project management and industrial fabrication

• A Budget and Finance Unit was created on 1 January 2011 bringing together functions that had been previously separate and has been strengthened by the recruitment of additional staffincluding several with long experience of Community processes

• The 2 previous administrative Departments have been combined

• Acting persons were appointed to all ‘new’ positions, but new persons will be appointed (or existing ones confirmed) in 2011

Slide 16

Improved F4E Structureimplemented 1 Jan 2011

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Slide 17

Improved Project Processes

• Project teams have held weekly meetings since November 2010; Senior management is holding regular reviews of progress

• A standard format has been introduced for reporting progress on all individual actions (contracts and grants) since November 2010

• F4E is aiming for a single and controlled source of project data

• F4E is aiming for improved reporting, eventually ‘Earned Value’

• Industry contractors from IO are helping F4E to improve and alsoensuring consistency with corresponding improvements in IO itself

• Processes (in general) are being developed in line with ISO 9001

• More widely, F4E is aiming to create a culture in which the project and financial environments (planning v accounting, Primavera v SAP, ISO 9001 v ICS, multi-year v annuality, etc.) are harmonised

Slide 18

Improved Financial ManagementImproved Procedures

• New financial circuits have been introduced in response to an internal audit which revealed weaknesses in previous ones

a. Responsibilities have been redefined to strengthen the segregation of roles

b. Actors have been trained; guidelines have been issued

c. Checklists for important processes have been introduced

d. A webpage has been developed to give on-line support

e. A manual of operational procedures is being finalised

• A methodology for ex-post control has been defined, and a pilot first exercise was performed in December 2010; a second one is foreseen in July. This will then be repeated on a routine basis

• A monitoring and reporting system is being set up to ensure an appropriate reporting on implementation of the annual budget

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Slide 19

Improved Financial ManagementImproved Internal Control System

• An Internal Auditor was recruited in July 2009, and the F4E Internal Audit team (3 staff) has been fully functional since mid-2010

• 3 audits have been completed so far (and 2 more are in progress):

a. Financial circuits: the critical and the majority of very important actions have been implemented; the other very important ones will be implemented by June

b. Management of grants: the final report was issued in January 2011: the Action Plan was set up in February

c. Management of experts contracts: the final report was issued in May 2011

• An Internal Control Coordinator has been appointed to ensure a centralised follow up of all audit recommendations

• An internal building blocks exercise is being carried out for the declaration of assurance for the 2010 Annual Activity Report (management supervision)

• The Internal Audit Service of the Commission will perform a Risk Assessment of F4E activities in June

Slide 20

Improved Financial ManagementKey Points in Response to ECA and EP Discharge

• F4E has developed a reporting system to ensure appropriate reporting on implementation of the budget

• F4E will propose to the Governing Board a specific procedure in relation to the late payment of Member State contributions

• F4E is reinforcing its internal control framework

• F4E established an Audit Committee in 2010

• F4E is preparing a revision of the F4E Financial Regulations (as part of the wider revisions to improve the governance of F4E)

• F4E is exploring the possible involvement of the Commission Internal Audit Service as its Internal Auditor; one informal meeting has been held; the IAS will next attend the meeting of the F4E Audit Committee on 25 May to explain how it acts as the Internal Auditor for other Joint Undertakings; the Audit Committee will then make a recommendation on this point to the Governing Board on 31 May

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4.3. Presentation by the Deputy Director General for Research and Innovation of the European Commission Mr Rudolf Strohmeier

1

Rudolf StrohmeierDeputy Director-General

Directorate General Research & InnovationEuropean Commission

ITER

and

the European Union

Cadarache, 16 May 2011

2

1. Reasons for EU’s engagement in ITER

2. State of Play of EU’s involvement in ITER

Outline

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1

A shared long term objective• EU’s overall objective in energy research: to keep energy

options open • ITER, an experiment that could lead to a new energy

source with the potential to:• provide a solution for energy supply • contributing to energy security and climate protection

over the long term.

1.a. Reasons for EU’s engagement in ITER:the rationale has not changed

4

Interests on short and medium term

• Major innovation potential with the EU in the driver’s seat• Leverage of public investments in science and technology• New products and spin-offs expected• A positive impact is already noticed• All ITER partners expect economic benefits

1.b. Reasons for EU’s engagement in ITER:the rationale has not changed

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5

• Progress in the construction

• Procurements are proceeding

• Reasons behind the estimated cost increase

2. State of Play of the EU’s involvement

6

• Management assessments

• Turning ITER Organisation into a project-oriented structure

• Changes are being implementedF4E: new managementF4E: new governance structure

Responses to cost increase

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7

• Additional 1.3 billion € for 2012-2013

• Council: “primarily” based on redeployment

• Commission proposal: a balanced compromise

• Europe 2020 Strategy and ITER’s role in it

• 1/3 -2/3 sharing principle

• Pro-rata contribution from FP7

Adjusting EU’s contribution to ITER (a)

8

• ITER baseline adopted ad referendum• Important decision for the international role of the EU• Euratom FP: funding needed for JET & others• A decision is urgently needed

Adjusting EU’s contribution to ITER (b)

36

9

• Japan’s contribution to ITER may be impacted by the recent natural hazards.

• ITER is part of the EU research policy that seeks to offer the broadest possible range of technological possibilities.

Final messages

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5. Index of documents and their sources

a) Factual background note

http://www.europarl.europa.eu/document/activities/cont/201109/20110909ATT26187/20110909ATT26187EN.pdf

b) Documentation Workshop "ITER, fusion energy and European energy scenarios"

http://www.europarl.europa.eu/document/activities/cont/201105/20110506ATT18846/20110506ATT18846EN.pdf

c) Background documentation

http://www.europarl.europa.eu/document/activities/cont/201109/20110907ATT26042/20110907ATT26042EN.pdf

The following major documents are directly accessible online:

1. ITER Agreement http://fusionforenergy.europa.eu/downloads/aboutf4e/l_35820061216en00620081.pdf 2. Council Decision (2007/198/Euratom) of 27 March 2007 establishing the European Joint Undertaking for ITER and the Development of Fusion Energy and conferring advantages upon it http://fusionforenergy.europa.eu/downloads/aboutf4e/l_09020070330en00580072.pdf

3. Commission communication: ITER status and possible way forward, COM(2010) 226, May 2010 http://ec.europa.eu/research/energy/euratom/pdf/iter_communication_may_2010_en.pdf

4. Commission staff working paper Towards a robust management and governance of the ITER project, SEC(2010) 1386 , Nov. 2010 http://ec.europa.eu/research/energy/pdf/iter-governance_com_sec_2010_1386_en.pdf

5a. Proposal for a Council Decision concerning the Framework Programme of the European Atomic Energy Community for nuclear research and training activities (2012 - 2013) COM(2011) 72

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0072:FIN:EN:PDF

5b. Commission staff working paper (SEC(2011) 204)

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=SEC:2011:0204:FIN:EN:PDF

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6. Proposal for a Decision of the European Parliament and of the Council amending the Interinstitutional Agreement of 17 May 2006 on budgetary discipline and sound financial management as regards the multiannual financial framework, to address additional financing needs of the ITER project (COM(2011)226) http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0226:FIN:EN:PDF 7. Commission Information on six points concerning ITER raised by the Chairmen of the European Parliament Committees on Budgets and on Budgetary Control in their letter of 10 March 2011 8a. Decision of the Governing Board of the European Joint Undertaking for ITER and the Development of Fusion Energy adopting the Financial Regulation http://fusionforenergy.europa.eu/downloads/procurements/F4E(07)-GB03-11.pdf 8b. as amended http://fusionforenergy.europa.eu/downloads/procurements/F4E(07)-GB04-06_Fin_Reg.pdf 9. ECA's Opinion No 4/2008 on the Financial Regulation of the European Joint Undertaking for ITER and the Development of Fusion Energy (Fusion for Energy) http://eca.europa.eu/portal/pls/portal/docs/1/1517548.PDF 10. Report on discharge in respect of the implementation of the budget of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2008 adopted in Plenary on 5 May 2010 http://www.europarl.europa.eu/document/activities/cont/201005/20100511ATT74479/20100511ATT74479EN.pdf 11. Final annual accounts of Fusion for Energy for 2009 http://fusionforenergy.europa.eu/downloads/aboutf4e/F4E_2009_Final%20Accounts_Final.pdf 12. ECA's Report on the annual accounts of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year ended 31 December 2009 together with the replies of the Joint Undertaking http://www.europarl.europa.eu/document/activities/cont/201011/20101123ATT99268/20101123ATT99268EN.pdf 13. Report on discharge in respect of the implementation of the budget of the European Joint Undertaking for ITER and the Development of Fusion Energy for the financial year 2009 adopted by the Committee on Budgetary Control on 21/3/11 http://www.europarl.europa.eu/document/activities/cont/201104/20110414ATT17808/20110414ATT17808EN.pdf

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6. Press review

Japan quake rocks fusion project

Damaged facilities force further delay to ITER experiment.

Geoff Brumfiel

St-Paul-lez-Durance, France

Construction of the ITER fusion reactor in France is beset by financial and technical problems. Altivue

The world's largest fusion experiment is finally beginning to take shape. Workers at a vast site in southern France have dug the 17-metre-deep pit that will house the ITER reactor, and will soon install 500 pillars of steel-reinforced concrete that should protect the machine during an earthquake. But even as they toil, a quake halfway around the world has struck a blow to the project.

The 11 March earthquake and tsunami that hit Japan, one of seven partners in ITER, severely damaged key facilities for testing the reactor's components. Unless repairs can be made or work reassigned quickly, the damage could cause a delay of "perhaps several years", according to Osamu Motojima, ITER's director. Motojima says that he and his team are looking at ways to reduce the impact. "At present my target is less than one year's delay," he says.

ITER's first experiments have already been pushed back from 2016 to 2019, and the project has suffered serious cost overruns since its partners agreed to go ahead in 2006. Any extra delays are likely to increase political pressure to find cost savings and speed up work.

The giant reactor is designed to prove that useful energy can be extracted from the fusion of hydrogen isotopes. By trapping the hydrogen using powerful superconducting magnets and heating it to the point of fusion at 150 million °C with specially designed heating systems, ITER is supposed to produce ten times more energy than it consumes. The Naka Fusion Institute of the Japan Atomic Energy Agency, which is about 100 kilometres north-east of Tokyo, was a key facility for testing and developing the magnets and heating systems. But it was hit hard by the quake. "The buildings are damaged and we can't go inside," says Hiroshi Kataoka, director of the fusion division at Japan's Ministry of Education, Culture, Sports, Science and Technology, which oversees Japan's contributions to the ITER project. "We are not sure, but it may have some impact on our ability to deliver products on time."

The magnet test facilities are particularly important for the project. Late last year, a sample of superconducting cable to be used in a central magnet failed testing at a

facility in Switzerland (see Nature 471, 150; 2011). Follow-up tests at the Naka institute were expected to help determine the cause of the failure and aid any redesign of the cable, which is being manufactured in Japan. The cable factories themselves seem to be undamaged, according to Richard Hawryluk, one of ITER's deputy directors-general.

Motojima says he is reluctant to shift work away from Japan unless absolutely necessary, but if the facilities cannot be repaired within six months, he says that he will seek arrangements with other partners in the project. A new schedule and any adjustments to the reactor's work plan must be ready by December, he says.

Meanwhile, the project's financial woes continue. Since 2006, ITER's construction costs have roughly tripled to around €15 billion (US$21 billion). The European Union, which is paying for some 45% of the project, has yet to find the additional €1.3 billion it needs to meet its near-term commitment in 2012 and 2013. Anne Jensen, a member of the European parliament from Denmark who sits on the parliament's budget committee, says that she and other members are generally supportive of the project, as long as it does not draw money away from other areas of research. "We think ITER is an interesting project, but it should not be at the expense of the development of wind energy or smart grids," she says. But she adds that she is optimistic that ITER's funding can be found by the 2012 deadline.

The other partners — Russia, South Korea, India, China and the United States, which along with Japan are each contributing around 9% to the construction — are also struggling to come up with additional funding. In the United States, for example, battles in Congress over discretionary spending have meant that ITER got its 2011 allocation of $80 million only last month.

Given the variety of financial and technical difficulties facing ITER, a further delay of "a couple of years" is probably inevitable, says Stephen Dean, president of advocacy organization Fusion Power Associates in Gaithersburg, Maryland. But, he adds, "that doesn't mean that they can't get it done".