Energy firm ČEZ gets three bids for Temelín nuclear plant expansion

11-07-2012

The biggest public procurement project ever held in the Czech Republic entered a new stage when earlier this month, the state-owned energy firm ČEZ received three bids to build two new blocks at the Temelín nuclear plant. The winning bid should be announced next year, while the project, estimated to cost between 200 and 300 billion crowns, should be finalized by 2025.

Boxes filled with thousands of documents were shipped to the Prague headquarters of the state energy firm ČEZ on Monday, July 2, detailing the three bids to expand the Temelín nuclear plant. The bids came from three corporations – the French company Areva, the US-Japanese firm Westinghouse and a group of Russian and Czech firms headed by the Russian state energy firm, Rosatom.

The bids will now be reviewed by experts in ČEZ who will rank them before the Czech government determines the winning offer sometime next year. The government commissioner for the expansion of the Temelín nuclear plant Václav Bartuška says the process follows the protocol for any public procurement project.

“It’s just like with any other company which has a management and shareholders. At this stage, the company – ČEZ – has to pick one of the three contenders, first on the engineering and financial level – or they might pick none. Then, they will ask the shareholders, and the biggest of them is the state with a 70 percent stake. The government will look at the project and decide whether or not it will allow it to go ahead.”

Today, some 30 percent of electricity generated in the Czech Republic comes from nuclear power. There are now two reactors at Temelín with a capacity of around 1,000 MW each, and four reactors at the country’s other plant, Dukovany which in total generates some 1,700 MW of electricity. Around 60 percent of electricity is produced in coal-powered plants and the rest in hydro and solar facilities.

The expansion of Temelín should fulfil the Czech government’s goal of producing up to 50 percent of electricity from nuclear power by 2030. While Germany has decided to phase out nuclear power and some other EU countries are considering the same move, the Czech Republic is becoming a champion of nuclear energy.

Václav BartuškaVáclav Bartuška “I don’t think we are debating the future of nuclear power as such. Most people in the country seem to accept nuclear power, and that we will stick with it for decades to come. There is no party represented in Parliament which would want to abandon it so there is no debate here of the kind you have in Germany or elsewhere in Europe.”

Some Czech environmentalists and energy analysts argue however that the country could do without expanding the Temelín plant. Instead, Czechs country could modernize some of their coal plants and rely on renewable sources of energy as well as higher energy efficiency. But Václav Bartuška believes Czech industry will need more energy once the recession in the EU is over.

“The demand for electricity in Europe has dropped significantly over the last three years. It’s either because we have become much more energy-efficient which I’m not sure about, or because we have gone through a major recession, and we have now a surplus of electricity.

“If you believe that Europe will come back to work and will again make things, then I think we will need electricity. If you decide to throw the towel in and become a continent which makes nothing and imports everything, then we don’t need new power plants and we can close down many of the existing ones.”

No details of the three bids have been made public but the cost of the two new blocks is usually estimated at between 200 and 300 billion crowns, or between roughly 10 and 15 billion US dollars.

Temelín nuclear power plantTemelín nuclear power plant After evaluating the three bids in view of price, the transfer of know-how and the volume of contracts for Czech firms, the government might still decide to scrap the entire project. But commissioner Bartuška says that is not likely to happen.

“The debate about the costs of nuclear power and about whether we really want to go ahead, that will be a major issue here, and it could easily end up with no one being chosen and the tender will stop. But at the moment, I don’t think this is what’s going to happen. I think that we will find a suitable project.”

Commissioner Bartuška refused to publicly comment on the bidders and their offers but David Tramba, an energy reporter for the daily Lidové noviny can. He believes the race is now on really between the Americans and the Russians.

“For the Russian Rosatom and the US Westinghouse, it is important to get the first real contract in an EU country, so they are very interested in getting the job. It seems that Areva is an outsider in the tender because of all the problems they are having in building the Olkiluoto 3 plant in Finland and Flamanville 3 in France. There are many problems in the form of delays and cost overruns and so on.”

Another reason why the French firm appears to be lagging behind its competitors is the type of reactor they are offering to build. While Westinghouse’s AP1000 reactor has a capacity of 1117 MW and the Russian MIR 1200 reactor generates 1113 MW of electricity, Areva’s reactor might be too big for Temelín.

“It’s 1600 MW of electricity, and that’s probably too much for a country like the Czech Republic. It seems that Westinghouse will offer a very good price because their reactor is based on a very interesting technical solution; it’s not as complicated as those made by the competitors.

“There is also a good chance for the Czech-Russian consortium because they have the best position in the field of cooperation with Czech industrial and technological companies.”

All three bidding companies have been markedly present in the Czech Republic in recent months. US ambassador Norman Eisen rarely fails to mention Temelín and Czech-US cooperation in nuclear energy at his appearances, just like French diplomats who stress the European aspect of the deal, and say the Czech Republic should not forget it’s a member of the EU.

The Russians, on the other hand, have focused mainly on lobbying among Czech industrialists and politicians, and gained an important ally. Czech President Václav Klaus said he considered the Russian bid the best based on the outlook that up to 70 percent of the work would be done by Czech firms. Lidové noviny’s David Tramba again.

“President Klaus likes to go against the stream. He supported the Russian bid even when their position was very weak.”

So what has changed? Why is their position stronger now?

“I think it’s mainly because of lobbying among Czech industrial companies because they feel that if the Russian bid wins, it will bring them the largest amount of orders.”

Do you think that the promise of 70 percent of the work to be done by Czech companies is realistic?

“In the case of the Russian offer, it seems that it could happen because they have a list of potential suppliers and it’s taken for granted that Czech companies will get 70 percent of the job if they win. But in the case of Westinghouse and Areva, I don’t think it could in fact happen in such a high proportion.”

David TrambaDavid Tramba Besides the total price and the volume of work for Czech companies, another consideration is linked to politics. Some believe it would be a mistake to award such a significant contract to a Russian firm, given the strained relations of the two countries and Russian efforts to keep political influence in central Europe. But David Tramba says these issues are no longer as relevant as they were at the start of the process.

“In the beginning, it seemed that and this would be the major issue – politics and relations with France, the US and Russia. But now it looks different; I think the price will be the most important factor in the tender.”

The plan to build two new blocks at Temelín has met with some opposition both in the Czech Republic and abroad. Czech environmental groups as well as local governments in German and mainly Austrian regions close to the south Bohemian plant are concerned, among other issues, about the plant’s safety. But Václav Bartuška says when public debates were held in those countries, the response was very limited.

“The fact that there is not much debate in Europe about energy is the most worrying issue. We had two public debates in Austria and Germany in recent months. In Austria, 30 people came while in Germany, maybe 50 people. We had a public hearing about Temelín in České Budějovice and there were some 80 or 100 people. For me, the real worry about nuclear power– but not only about that – is that people don’t really care much about anything which I think is bad for democracy.”

The decision about Temelín will be built will largely depend on economic calculations. It would make little sense to invest so much money – between one fifth and one third of the entire state budget – into an operation that would not generate profit. The energy firm ČEZ is reportedly looking into spreading the costs with private investors; another option would be introducing guaranteed purchase prices for electricity, thus sharing the costs with consumers. David Tramba says ČEZ managers are betting on higher electricity prices in the future.

“No one knows how electricity prices will develop in the coming years. One issue is the economic recession in Europe, and also a very chaotic energy police in the EU. But it seems that the price might go up because many old power plants will close down, so I think [set purchase prices of electricity] is a kind of insurance as people in ČEZ management are considering their options in case the price remains low in the long run.”

The Czech government will have the final word on the project. But given its record of corrupt public procurement projects – a series of army deals, for instance – can Czechs be assured that the decision will be in the country’s best interests? Commissioner Bartuška says he is tired of talking about it.

“If you don’t trust the government, replace it with another. You do that via elections in which you choose the politicians you trust. I’m really a bit tired of the argument in this country that we are run by crooks and idiots. If it’s true then we are all idiots.

“If you let people you don’t trust to run your finances and decide about your future, then you are yourself rather dumb. If that’s what’s happening with Czech, then it’s a very sad story and cannot be improved by any transparent tender.”

After the bids are pre-ranked by ČEZ by the end of this year, the government should announce its pick in the summer of 2013. If they decide to go ahead with construction, the two new blocks should be fully operational by 2025.

11-07-2012