Business Political and economic factors bury Temelín tender for now

11-04-2014 14:23 | Chris Johnstone

Czech state owned power giant ČEZ’s move to scrap its tender for expanding the Temelín nuclear power plant has been in the rear view mirror for some time. The company is saying it’s an economic decision not a political one, but in fact it is a bit of both.

Temelín nuclear power plant, photo: Filip JandourekTemelín nuclear power plant, photo: Filip Jandourek A lot of the impetus for the Temelín project disappeared with the fall of the former centre-right coalition of prime minister Petr Nečas. Although no one would say so openly, there were top members of the former government who were hoping that the deal would be won by the Westinghouse company and its victory would lay some more solid foundation for relations with the US.

The impression now in Washington, which backed the US based but Japanese owned company’s bid at a top level, must be to certain extent that they have been strung along. Ironically, a Czech-US civil nuclear cooperation deal was signed just over a week ago.

Politics, Russian politics and the recent events in Ukraine, also played another role in crippling what left of the tender by making it virtually impossible for ČEZ to choose the cheaper, but technologically inferior, MIR 1200 offer. The Russian led consortium at one time said it would even consider financing part of construction in return, say, for a chunk of ČEZ shares.

In the final analysis though, ČEZ could not push ahead with the project without the sort of state guarantees that have backed all nuclear construction projects in the past. It asked whether any support would be on offer and this week got back a blunt ‘no.’

The government can hardly be blamed for calling a time out before committing to new nuclear capacity. The price advantage of low carbon nuclear capacity over coal should be a lot clearer when the European Union clarifies its climate change and carbon reduction targets to 2030 over the next year.

It should also be clearer within a year or two whether the country’s oldest nuclear power plants at Dukovany can count on a 10 year or even longer life extension. ČEZ is looking for at least an extra 10 years to 2025 but sees no reason why the four reactors should not be operational to 2035 and beyond. A longer extension would take a lot of the pressure off to build new nuclear plants.

As Industry and Trade Minister Jan Mládek remarked on Thursday the cooling off period following cancellation can be used to reflect on whether it might be better for the state to set up a new company to build nuclear power plants rather than proceed through ČEZ. Shareholder companies, even ones that are almost 70 percent state controlled, still have to look to the short term interests of investors and are not the best vehicles to push ahead with investments with a 60 year return. The immediate reaction of ČEZ shareholders to the tender’s cancellation was an almost 3.5 percent hike in the share price.

The original ambitious tender for two reactors at the same time could be trimmed down in the future to maybe just one, at Temelín, with a gap following, perhaps, before another is built at Dukovany, he suggested.

A future tender could also open up to more bidders than just Westinghouse and the MIR 1200 consortium, Mládek added. Excluded French constructor Areva could be allowed back in after its exclusion and dominant South Korean electricity producer and nuclear power company KEPCO could also be allowed into the bidding.

The minister revealed that South Korean representatives expressed interest in KEPCO being given a chance to compete in the tender when he visited Seoul at the end of March. KEPCO operates over 20 nuclear power plants though its reputation has been tarnished by closures of some of them in a safety scandal.

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