Poland bids to return to Baltic nuclear project

By bne IntelliNews May 17, 2012

Tim Gosling in Prague -

PGE, Poland's largest utility and anointed leader of the government's nuclear power push, is considering resuming its role in the planned Baltic nuclear power plant Visaginas, local media reported a company official as saying. Warsaw says the move is motivated by the wider strategy to connect the Baltic "energy islands" to European networks.

Speaking at a conference in Katowice on May 16, the state-controlled company's deputy CEO, Pawel Skowronski, expressed PGE's reinvigorated interest in the project, which is set to be completed in Lithuania in 2020, but warned that the Poles still hope to see some terms for participation altered, Polish daily Dziennik Gazeta Prawna reports.

Without setting out Poland's demands, the official said Warsaw is ready to renew talks on the project should Vilnius be inclined to negotiate on the changes. Poland pulled out of the scheme - which it had been discussing with the Baltic states since at least 2006 - in December.

PGE CEO Tomasz Zadroga said in a statement at the time: "In the face of conditions that PGE found unacceptable at this stage and taking into account other key projects, we have decided to suspend our participation in this project before its takes the form of any formal obligations." PGE is responsible for building Poland's first nuclear power plant, which is also planned to launch in 2020. The company said on May 14 that it will launch a tender for the technology that the plant will use by the end of June 2012.

However, Skowronski now says PGE would like to return to Visaginas, not only because of business, but also due to strategic considerations. "In a few years we will have a common energy market," he pointed out, "and seeing the situation from this perspective, it would be better to be a part of the Lithuanian project."

The PGE official did not discuss the level of participation the company would look for, but it's notable that its bid to return comes as the current Visaginas partners are negotiating their initial shares in the plant.

The Lithuanian cabinet formally approved a strategic plan on the €5bn project on May 9, under which Lithuania will hold a stake of 38%, Estonia 22% and Latvia 20%, with strategic investor Hitachi to hold the remaining 20%. The project will be financed in three installments - €62m will be allocated during the 12 months following approval of the plan by the Lithuanian parliament, with the next installment of €150m spread over the following 18 months. The remaining sum, which is not expected to be over €5bn, will have to be earmarked by March 2015 at the latest, just ahead of the start of construction.

However, Visaginas continues to create controversy in the Baltic states, not least due to its leading role in the region's bid to reduce reliance on Russian power, although resistance to nuclear projects across the EU since the Fukushima disaster is also palpable.

The differing approaches to Russia amongst Lithuania, Latvia and Estonia have seen no little bickering between them over plans for regional energy projects, and the nuclear plant is no exception. Meanwhile, Poland's relations with Lithuania have come under increasing strain recently, expressed through issues such as minority rights for the Polish community in the Baltic state. However, the issues surrounding the struggling Mazeikiu Nafta refinery, which Poland's PKN Orlen bought in 2006 only to see Russia cut off its pipeline crude supplies, are perhaps more concrete.

At the same time, Poland is key to the integration of the Baltic "energy island" into EU networks. Due to their Soviet history, the Baltics remain isolated from European gas and electric grids, and therefore entirely reliant on routes from the east. Visaginas is one of the key projects in this context, with the hope being that it will connect to Poland, Finland and Sweden through a grid dubbed the Baltic Energy Market Interconnection Plan. A Poland-Lithuania gas interconnector is also inching forwards.

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