Business Czech head of state calls for Areva return to Temelín tender
Czech president Miloš Zeman has a lot to say about most macroeconomic issues but his call for French nuclear constructer Areva to be brought back into the Temelín tender does not totally add up.
Czech head of state Miloš Zeman has called for state controlled utility ČEZ to close its current tender for two new nuclear reactors at its Temelín site without a winner being declared. On the heel of that move, a new tender could be opened in which French nuclear constructor Areva could be bought back into the competition. Zeman’s call, made during a visit to the south Bohemian region, could kill two birds with one stone.
First of all, it would probably be based on Areva ending its current procedures in Czech courts and at the European Commission to challenge ČEZ’s decision back in October 2012 to throw it out of the original tender for failure to meet some of the criteria. The move left US based Westinghouse and the Russian led MIR 1200 consortium in the running what has been described as the Czech tender of the century.
Secondly, Zeman argues that two bidders are good, but three are a lot better in any competition. His rule of thumb is that at least a five percent cut in the price of the contract can be won from putting Areva back in the game. Added to that, the head-of-state says that the new for old tender would only mean a delay of several months to the ongoing procedures.
So far, so good. But the problem is that Areva is offering reactors with a lot more capacity than its rivals and its price tag is reckoned to be correspondingly higher as well. It’s experience of building such reactors is not a great selling argument either with existing projects well over cost and schedule. Areva says it is learning the lessons.
ČEZ is already casting around for how it can finance the project and how a reluctant Czech government can be convinced to take on some of the risks involved. A more expensive contract in this context does not seem to be what is needed. Of course, Areva’s participation might be more or less symbolic, or it could maybe tie up some joint venture arrangement with another of the bidders. Time might normally be money in business circles, but in this case ČEZ is not in much of a hurry to push ahead with the Temelín tender. In fact, the more delay the better since time might shed some light on a very unclear outlook for the whole energy sector pending new European targets on climate change and greenhouse gas reductions.
Added to that, the European Commission appears to be taking a very skeptical view on state support for new nuclear capacity if its initial comments on British aid for two new reactors are anything to go on. That stance has angered both the Czech government and ČEZ and been taken as an indication that Brussels is exceeding its powers to interfere in the choice of national energy priorities. Perhaps, the most that Zeman’s call has going for it is that it does not really matter. The Czech government, ČEZ, European climate change decisions, and the decisions of neighbouring states to build more power plants will have a much more telling impact on this than the head of state.