Czechs eject Areva from Temelin nuclear tender

By bne IntelliNews October 5, 2012

Nicholas Watson in Prague -

In a shock announcement, Czech power company CEZ on October 5 excluded France's Areva from its multi-billion-euro tender to expand the Temelin nuclear power plant for failing to fulfill all the requirements, leaving Toshiba's US unit Westinghouse and a consortium led by Russia's Atomstroyexport as the two remaining bidders.

"CEZ has today informed Areva that they have in their bid failed to meet statutory requirements for building two new units of the Temelín Nuclear Power Plant," the utility said in a statement. "Moreover, Areva has not fulfilled some other crucial criteria defined in the tender. Since the award procedure has been conducted in accordance with the Public Procurement Act, Areva's bid had to be excluded from further evaluation."

CEZ didn't go into specifics, which it said involved both commercial and legislative reasons, explaining that because Areva can appeal the decision, it is unable to say more until that process has been exhausted.

For its part, Areva said it intends to file an objection against this decision under the tender rules. "Areva firmly believe we have met all the tender criteria and we look forward to addressing the issues raised by CEZ," a spokesperson for Areva told bne. "We are confident our offer to CEZ is the most competitive one and our commitment to the Temelin completion project remains absolute."

The decision to be excluded at this stage of the process is certainly a surprise. In July, the three pre-qualified bidders in the roughly CZK200bn (€8bn) tender to build two new nuclear units at CEZ's 2-gigawatt Temelin nuclear power plant submitted their bids. The three have since being trying to outdo each other in signing up local partners in an attempt to sway the public and the government, which owns 70% of CEZ. Areva's latest announcement came less than a week ago, when said it would create around 11,000 jobs if it won the tender, expected to be decided in 2013.

Only on Thursday, Areva's chief commercial officer, Ruben Lazo, was telling bne in an exclusive interview that Areva fully expected to win the tender, arguing that it is the only one that is currently constructing reactors in Europe and is the most "reliable" nuclear partner for CEZ. "The nuclear industry is not a transactional, commercial operation, it is a long-term partnership we are talking about here for the next 60 to 100 years, and we are making that clear to the Czech government," he said.

Insiders in Prague, however, point out that for several reasons Areva's bid always looked the weakest. For one thing, its reactors are much larger and consequently more expensive than the others. Areva is offering two of its EPR reactors with a total output of around 3,300 megawatts (MW), while Westinghouse and the Atomstroyexport consortium, which includes Czech company Skoda JS, are offering two reactors with an output of around 2,200 MW.

Areva officials have also admitted to bne that it lacks the political lobbying heft of the Americans and Russians. Westinghouse has received strong support from the White House, while Russophile Czech President Vaclav Klaus already hinted at the end of last year he would favour the Russian-led bid.

Atomstroyexport's parent, nuclear holding Rosatom, sweetened the Russian offer in March by stating that it is ready to offer full funding for the project, and would consider any type of strategic partnership, including one that would see it become a shareholder in CEZ itself. This was regarded by observers as a crucial move, since CEZ is clearly struggling to come up with funding for the project without state guarantees that the Czech government has repeatedly ruled out. In May, CEZ said it is considering launching a parallel tender to select a strategic partner for the project.

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