Russians woe Czech suppliers for Vietnam reactor jobs
The fact that the bid process for up to five new nuclear reactors at Temelin in the Czech Republic has been delayed for a year is not unusual. Just look at the contrary decisions by the U.S. government and Constellation over Calvert Cliffs to see how competing interests can scuttle a major energy deal. What is unusual is that in the case of the planned expansion of Temelin, the utility that runs them, and the government which believes it has a stake in the decision, are at odds over the one-year delay announced last month.
Czech Prime Minister Petr Necas said Oct 19 the selection of the winning bidder will be delayed by one year to 2013, but he also said that construction would proceed to meet the 2020 start-up date envisioned in the original schedule. In doing so Necas confirmed once again a paradigm well documented on this blog that politicians are always more confident than engineers.
The utility CEZ, which will build, own,and operate two and as many as five new reactors worth upwards of $25 billion, has short-listed three firms – Areva, Westinghouse, and Atomstroyexport. The Russians, who once controlled the then much larger Czechoslovakia in the Cold War era, retain the idea that the now smaller Czech republic remains within their sphere of influence. They’ve already announced they believe they will win the bid hands down.
The Russians have major energy deals with most of eastern Europe, Germany, and Poland for natural gas. If they win the $25 billion Temelin contracts, they could easily dominate the nuclear energy space as well. The principle seems to be Russia follows energy markets as a matter of state policy.
Who's in charge of the future of Temelin?
In what looks like Soviet style central planning, Czech PM Necas told financial wire services Oct 19 that the government, and not CEZ, will make the strategically significant decisions about the timing of the award to build the reactors and who will get the jobs.
Speaking after a meeting with government ministers including his national security advisors, Necas said:
“This is an incredibly important tender that carries considerable security, economic, and geo-polticial risks. It is a basic strategic question for the state. And the responsibility for such a decision cannot lie in the hands of a private company, even if the majority owner is the state. Only the Czech government can be responsible for such a strategic decision.”
Russia’s sphere of influence?
Well, there you have it. From an energy perspective, it looks like the Czech government is still a puppet of the Russian bear. So much for the “velvet revolution” when it comes to energy deals.
But wait! It turns out the Russians are capitalists after all. According to wire service reports, Atomstroyexport is asking Czech manufacturing firms to provide components for its new contract for two 1,000 MW VVEr reactors to be built for Vietnam.
Czech nuclear equipment manufacturer Skoda JS, which already makes parts for Russian reactors, is reportedly in the “early stages of negotiations” with Russian state nuclear corporation Rosatom for future supply contracts for nuclear new build in Vietnam. Skoda JS project manager Roman Zdebor told NucNet Nov 2 that the construction of Russian-built VVER units in the future was likely to include Czech companies in the supply chain.
He said Czech suppliers were taking part in the construction of two units in Vietnam, Ninh Thuan-1 and Ninh Thuan-2. Russia and Vietnam have signed an agreement for the construction of the 1,000-megawatt VVER units.
Speaking at the VVER 2010 international conference in Prague in the Czech Republic, Mr Zdebor said it was “assumed” that Czech companies would also participate in more Rosatom new build contracts outside Russia, like the one at Temelin.
He said this has been “assured at the highest level” and that Rosatom is looking to “enhance cooperation more generally” with Czech companies.
Local content and technology transfer
This brings us back to the pleadings of the Czech utility executive who is in charge of the bid process. Vaclav Bartuska has told all three bidders that local content of the new reactors and technology transfer will be key factors, along with price and schedule, in picking a winner.
Russian Deputy Prime Minister Alexander Zhukov (right) understands this. He met Oct 19 with Czech Industry and Trade Minister Martin Kocourek and stressed that Czeck suppliers would be getting a good deal on the VVER project in Vietnam. So it looks like the Russians are getting in early on the local content option. Jobs are jobs no matter where the parts go.
In point of fact, it looks like Bartuska has given Zhukov and opening and the guy has punched a hole in the defensive line scoring a first down with the contracts for Czech manufacturers.
Who will pay for the first two reactors?
The Russians have not yet played the ‘ace-in-the-hole’ they hold, which will likely be an offer to self-finance the construction of the reactors. CEZ CEO Martin Roman told financial wire services Oct 20 that the cost of the first two reactors will be about $11.3 billion. He said the utility is “looking for partners” to finance the deal. However, in another breath he also said the utility could finance the project on its own.
Roman confirmed what this blog reported last month which is that the Temelin reactor complex is being built to be a major exporter of electricity to Germany and Poland. If Russia builds and controls the reactors, it will be taking a new step in dominating the energy supply of these countries. It already is a major supplier of natural gas. Nuclear power is the obvious next play on the energy chessboard.
Impact on Temelin of Germany’s nuclear life extension
The fact that Germany is allowing its 17 reactors to operate past 2020 may have influenced the decision to delay the award of bids in 2012. CEZ had been counting on selling electricity from the first two new units at Temelin across the border. The units are to enter revenue service in 2020 and 2021. Czech Industry & Trade Minister Martin Kocourek told wire services that the global recession had reduced electricity demand, bringing about the setback.
Should the utility go ahead in 2013, it still must decide how to finance the project and whether suppliers could be expected to take equity stakes. A key issue will be where CEZ can sell its generated power. In a September presentation to investors the firm said it planned to market electricity in Germany, Poland and other neighboring countries.
Germany’s recent decision to keep its 17 reactors operating well past the original 2020 closure deadline appears to have played into the CEZ change of heart regarding the Temelin tender. It has delayed but not stopped the biggest new reactor project in Europe. It’s high stakes for everyone.
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