Areva loses latest appeal over ejection from Czech nuclear tender

By bne IntelliNews July 29, 2013

Nicholas Watson in Prague -

The French nuclear firm Areva on July 26 lost the latest appeal against its controversial ejection from the Czech Republic's giant nuclear tender, leaving it vowing to continue legal proceedings in the administrative court of Brno.

The state-controlled utility CEZ disqualified Areva from the estimated €8bn-€12bn tender to build two new reactors at the Temelin nuclear power plant back in October 2012 over what it said were "serious shortcomings" in its preliminary bid. This left the Russian-Czech consortium of Skoda JS, Atomstroyexport and Gidropress duking it out with the Japanese-US firm Westinghouse.

Since then, Areva has launched a serious of appeals against its exclusion that have all failed, with this latest one to the chairman of the Czech antimonopoly office (UOHS) being dismissed by Petr Rafaj, who said in a statement he agreed with his office's initial decision in February that Areva had not met the tendering conditions.

Areva responded in a statement that it "is resolute to defend its rights in all available instances and will now open legal proceedings against the UOHS decision in the Brno administrative court."

Sources have told bne that Areva has also already approached the European Commission about its concerns and could yet continue appealing the decision all the way to Brussels. That process could take years.

However, this is not the only problem for CEZ's nuclear tender. On July 23, CEZ was forced to admit that its goal to pick a winner and sign the contract by the end of 2013 is unlikely to be met because of the spectacular collapse of the centre-right government in June over a spying and bribery scandal. Now the final contract might not be signed until the autumn of 2014, said Pavel Cyrani, a CEZ board member.

Into the political vacuum has stepped President Milos Zeman, who since assuming the presidency in March has repeatedly thrown constitutional caution to the wind, and over the objections of all the major parties in parliament installed a "government of experts" consisting of his close allies, some with dubious pasts.

Zeman is a big advocate of nuclear power and has close ties to Russian business. While both he and Prime Minister Jiri Rusnok claim the new cabinet won't make any decision on the nuclear tender, it's clear the president intends to use the vaguely worded constitution to keep his allies in power until the next scheduled elections in May 2014, leaving many to suspect that choosing a winner is indeed what will happen.

For the remaining two bidders in the tender, Atomstroyexport and Westinghouse, it's business as usual.

On July 25-26 Fred Hochberg, president of the US state Export-Import Bank, which lends money to foreign companies that do business with American exporters, was in town, accompanied by the president and CEO of Westinghouse, Danny Roderick. In an exclusive interview with bne, Hochberg said the Temelin expansion "right now has got our full attention."

Financial backing from the likes of Ex-Im Bank is key to Westinghouse's bid. The economics behind Temelin have come under scrutiny, with many believing that without state support, such as through price guarantees for the electricity produced, the project is unviable. Rosatom, the Russian nuclear holding company of which Atomstroyexport is a part, has stated in the past it would even be prepared to offer full financing for the project.

Roderick admits the political crisis is causing some unforeseen delays, but that the main three reasons why the project was launched in the first place will still be there regardless of which government is in power. "There's the concern about long-term energy security; the concern about greenhouse gas emissions; and the concern about economic growth and jobs... It may take a while more for the government issues to shuffle out, but at the end of this those same three things will still be present and that will drive the plan to go forward," Roderick tells bne.

He adds that with interest rates at historic lows and a good buyers' market existing, this is the ideal time to press on with mega-projects like this. "Keep in mind that interest rates are going to go up in the future and when rates go up, so do the costs of supplies and materials... It's a very good time to go ahead with the project."

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