Will Czech Dukovany Nuclear Plant be built by Russia?

  • Barbora Chrzová (PSSI)
  • 25.9.2017 16:13

The Czech Republic (CR) adopted an Updated State Energy Policy (USEP) in 2015, which confirmed that nuclear power will be the main source of energy for the CR in the medium term. In 2014, the Czech Power Company (CEZ) cancelled an ongoing tender for the completion of new reactors for the Temelín NPP, following the state’s refusal to guarantee electricity purchase prices. Yet discussions about building a new reactor for the Dukovany plant began just a year later.

According to the USEP, the share of nuclear power in the domestic energy supply of the CR should increase from 30% to 50 % in the following years. The National Action Plan for the Development of Nuclear Energy Sector from 2015 follows the USEP and assumes that both Czech nuclear power plants will be extended by one or two reactors. Both reactor units at Dukovany are nearing the end of their service lives and the construction of new reactors should be finished by 2035. According to Jan Stuller (the Czech government commissioner for nuclear energy), to meet this deadline the form of financing (whether the construction will be financed by the state, CEZ, or a group of investors) and tender needs to be defined in 2018, with the selection of the supplier realised by 2020. Czech PM Bohuslav Sobotka said the speed-up of the tender preparations is one of the main tasks for Jiri Havlicek (the Czech Industry and Trade Minister), while the form of the tender will only be discussed by a new government, following the autumn elections.

At the close of 2016, the Czech government approached nine companies supplying the required type of reactors, issuing an extensive questionnaire specifying the criteria of the offer. Six companies replied – Russia’s Rosatom State Atomic Energy Corporation, EDF (France), American-Japanese Westinghouse, South Korea’s KHNP, China General Nuclear Power Group and the joint project of Areva and Mitsubishi, Atmea. The first talks followed in January and February 2017. The lifespan of nuclear power plants is around 60 to 80 years: due to the complexity of nuclear technologies, the supplier typically provides assistance (such as employee education) and maintenance for the plant after construction and often also becomes the fuel supplier.

 

“The Czech Republic is fully dependent on nuclear fuel from the TVEL company, a subsidiary of Russia’s Rosatom.”

 

Both of the Czech nuclear power plants are currently owned and managed by CEZ, with the state holding a majority share (69,8%), but for nuclear fuel the CR is fully dependent on supplies from the TVEL company, a subsidiary of Rosatom. Among foreign actors, Rosatom has the dominant position in the Czech nuclear sector since both Czech plants were built in part (Temelin) or whole (Dukovany) by Soviet (Russian) companies using Russian technologies. Temelin was completed by Westinghouse, who also supplied fuel to the plant for eight years, but the company is currently facing serious financial difficulties and its efforts to access the Czech market are jeopardised. Conversely, Rosatom has the potential to significantly increase its presence, since the possibility of Rosatom participating in the construction of one of the planned new reactors is somewhat likely.

 

Rosatom is among the candidates for the completion of Dukovany and has long been showing interest in expanding to the Czech market. In 2012 it opened a branch of its Rusatom Overseas subsidiary in the CR and two years later it established the Rosatom Central Europe company, based in Prague. In the case of the Temelin tender, the Czech-Russian MIR.1200 consortium (composed of Skoda JS and two Rosatom subsidiaries, Atomstroyexport and OKB Gidropress) was a candidate, along with Westinghouse. CEZ backed out of the tender only a few months after Russia’s annexation of Crimea, prompting some in the Czech political scene to describe the possibility of Temelin being completed by Russian companies as ‘unimaginable’.

 

This dilemma also appears in the discussion about the completion of Dukovany in times of continuing tensions between Russia and the West. The choice of supplier is closely related to the financial and investment model of construction and Rosatom appeared with an offer the state was interested in. One of the key questions in supplier selection is how much the supplier should be involved in the financing of the construction, so that they have an interest in keeping to the construction timetable without overpricing it. Rosatom showed willingness to largely finance the construction of Dukovany.

 

According to Nikita Minin and Tomas Vlcek from Masaryk University, the high flexibility and ‘tailor-made’ offers might be some of the main features of Rosatom’s long-term, significantly export-oriented strategy which was approved by the Russian Government in 2011. As a state corporation (established in 2007, with CEO and supervisory board members appointed by the Russian President and long-term strategy approved by the Russian Government), Rosatom occupies an advantageous position, including access to loans from Russian state banks. According to Minin and Vlcek, in contrast to Gazprom and other Russian state energy companies, Rosatom follows primarily economic motivations. In the highly competitive nuclear sector Rosatom’s main interest is to maintain a good reputation and avoid the business getting politicised.

 

“Despite Rosatom’s current market behaviour, the Russian political establishment has the final say in the company’s strategy.“

 

It is not surprising that the Russian state, in facing economic problems and increasing isolation, has the most interest in keeping Rosatom’s good reputation and will seek to maximise its profits, which then go into the state treasury. Despite Rosatom’s current market behaviour, it is the Russian political establishment who have repeatedly used economic superiority to achieve their goals and have the final say in the company’s strategy. Given Russia’s engagement in the Ukraine conflict, efforts to influence European and American elections, aggressiveness and unpredictability of the Russian Federation’s current foreign policy, Rosatom’s present economically motivated strategy is a very weak guarantee for the future. This can raise doubts about whether Rosatom can be a trustworthy partner to the CR Government, offering decades of problem-free cooperation.

Fears about Russia’s reliability clearly do not trouble Czech president Milos Zeman who, during his visit to Dukovany in June 2017, contradicted the government’s plan to issue an open tender and said he would not mind if the state chose Rosatom to complete the plant without a tender, as was the case of the inter-government agreement between Russia and Hungary about the completion of Hungarian Paks NPP. The final choice is a critical one: the new reactors in Dukovany will still be in service in 2100 and the selection of their supplier is, therefore, a deeply strategic decision.

 

 

 

About author: Barbora Chrzová (PSSI)

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