Czech government ready to offer nuclear financial support

By bne IntelliNews April 2, 2012

Tim Gosling in Prague -

The Czech government on March 30 strongly suggested it will offer guaranteed prices for the electricity produced by nuclear power plants. The news is a significant boost to state-controlled energy giant CEZ and its plan to expand its Temelin nuclear plant.

Accused of clouding the issue for the investor when he finally spoke up on the issue on March 28, Industry and Trade Minister Martin Kuba stated clearly two days later that he supports price guarantees in order to promote the nuclear sector as a strategic priority, and specifically said that Temelin is very close to securing that back up.

Kuba had previously told a press conference that the state would not offer CEZ guarantees on any loans it takes on to build the CZK200bn (€8bn) expansion at Temelin, and merely hinted that price guarantees might be discussed. However, during a visit to the power plant on March 30, the minister offered far more certainty to CEZ. "I can imagine looking for some model - and I believe we have an agreement on that - which would create conditions for the energy from this (Temelin) investment to be reasonable in the long-term for the investor," Kuba said, according to Reuters.

CEZ insists that it is capable of financing the project - on which the basic economic case has been questioned - from its own sources, but it has been lobbying hard for the government to help it out at the same time. The company says that this is merely because it may have to divert capital from other projects to find the full funding.

However, the company is also looking to rule out as much uncertainty as possible, with the tender for construction of the new units due to be announced by the end of 2013. Earlier in April, Russian state-owned Rosatom - which is leading one of the bids - said that Moscow is ready to offer up to 100% of the funding in return for a share of Temelin, or in CEZ itself. CEZ meanwhile has said that it favours the funding model seen in the UK, which offers feed-in tariffs and state-guaranteed emissions allowances as a way of getting rid of some of the financial insecurity surrounding such a large-cost, long-term project.

Kuba appears to have understood that his earlier remarks did little to reduce that uncertainty, and offered far more clarity on his standing concerning feed-in tariffs for nuclear power in his latest statements. "The government must say what sources it wants in its energy mix, what portfolio it wants," the minister stated. "That is a strategic decision which cannot be dictated only by economic conditions on the market because ... at this point for many energy firms it would be economically most favourable to build the supported (renewable) resources."

Creating an apparent dichotomy between state support for nuclear and renewable energy makes sense in the Czech Republic because renewable support programmes have earned severely negative press for high costs to the taxpayer and lack of transparency. Kuba pursued that goal almost to the point of indecency, displaying in the process his intention to push through support for Temelin. "We are now supporting, with CZK32bn a year, installations that make a minimal contribution to the power system," the minister complained. "If you asked me whether it is wise to support nuclear energy against photovoltaic plants, than as industry minister I have to say yes."

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