Lithuania blames Russian manoeuvring for killing nuclear plans

By bne IntelliNews December 3, 2010

Mike Collier in Riga -

As planned, almost exactly one year since Lithuania launched a tender for construction of a new nuclear power plant, the process came to an end. What wasn't planned, however, was the manner in which it came to an end: total failure.

To say that planning for the proposed nuclear power plant - to be built jointly by the three Baltic states plus Poland near the town of Visaginas in northern Lithuania - has had some setbacks is like saying the US diplomatic service has some issues with leaks.

In 2007, then-president Valdas Adamkus organised the Vilnius Energy Conference with the express purpose of chivvying the already delayed nuclear plant along ahead of the decommissioning of the existing Ignalina facility at the end of 2009. Nothing happened. By early 2009, Adamkus was telling bne that Lithuania would be "digging the ground" at Visaginas by the autumn of that year. Unless he was talking about growing potatoes, he was wrong.

Meanwhile, in 2007 a "national champion" giant energy company called LEO LT was formed to take charge of the project - only to be liquidated less than two years later as one of the first acts of the government of Prime Minister Andrius Kubilius, who instead set up a new Energy Ministry to take up the plan. In fact, the use of the word "plan" is probably somewhat optimistic: nearly a decade after the project was first discussed, no binding commitments have been signed by any of the numerous concerned parties.

A tender subject

The tendering process was supposed to deliver that longed-for plan. Interested "strategic investors" from among the world's nuclear giants would present their bids, which would gradually be evaluated and whittled down first to five contenders, then two, then one.

A huge step forward would be made with the announcement of a winner who would take a 49% stake in the project worth a total of €4bn-6bn. Then Lithuania would be able to persuade Estonia, Latvia and Poland to actually sign something instead of just offering increasingly vague statements about how they would support the project once there actually is a project to support.

Energy Minister Arvydas Sekmokas had seemed to be making progress. The tender was launched on December 10 last year and when reporters gathered on Friday, December 3 they expected to hear the name of the winning bidder, which unofficial sources had been saying for weeks would be the South Korean utility Korea Electric Power Corporation (Kepco). Instead, Deputy Energy Minister Romas Svedas told journalists that Kepco had withdrawn from the contest at the last moment, turning the whole tendering process into a farce, as the only other final binding offer received (from an unnamed company) had been deemed not to meet the requirements of the tender.

Lithuanian Prime Minister Andrius Kubilius had contacted the South Korean president, Lee Myung-bak, to try persuade Kepco to reconsider, Svedas said, but to no avail. South Korea has its own, more pressing set of nuclear problems to deal with.

Blame the bear

The reasons for Kepco's sudden departure were not overtly stated during the brief press conference to announce the decision, but in one fascinating exchange Svedas was asked if it was true that Russia had leaned on Kepco. Svedas praised the reporter for asking such an "excellent" question, then said he had better take the opportunity to remain silent on the matter.

If Svedas chose to confirm by omission, the chairman of the Lithuanian parliament's Atomic Energy Commission chose to be more explicit: "I had information that Russia frightened off other potential investors in the Lithuanian project through blackmail and promises. It seems that this has happened to Kepco too," Rokas Zilinskas said in a press statement.

According to Zilinskas, Kepco was being wooed by Russian energy giant Inter RAO UES in connection with rival nuclear power plants slated for construction in the Kaliningrad region on Lithuania's western border and in Belarus on Lithuania's eastern border. Faced with the choice of one project in Lithuania with a history of delays and a complex ownership structure or two possible projects with full and immediate state backing, Kepco chose a "polite" withdrawal from Lithuania, Zilinskas claimed.

The Lithuanian government tried to salvage something from the debacle by saying negotiations would now begin with potential partners on an individual basis - which begs the question why they bothered with a tender in the first place. But fresh doubts will inevitably arise about whether Lithuania will ever sort out its nuclear plans. The cancellation of a visit by Latvian Prime Minister Valdis Dombrovskis to examine the proposed construction site on November 26 looks more significant than it did at the time. Lithuania's diplomatic relations with Poland are at their lowest ebb since the restoration of independence 20 years ago. Estonia is busy scouting locations for a small nuclear plant of its own, on the basis that if you want something done properly, do it yourself.

If by some miracle Lithuania does manage to formulate its master plan, even the most optimistic forecasts suggest any new plant would not be producing power until 2020 at the earliest. With Russia's Kaliningrad plant due to come online four years earlier and be producing more energy than the oblast could possibly need, the rationale for construction of yet another plant in the region is highly questionable. Just ask the Koreans.

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