Russia offers to fund Czech nuclear expansion

By bne IntelliNews March 21, 2012

Tim Gosling in Prague -

Disturbed by persistent reports that CEZ will struggle to finance the two new nuclear reactors planned at the Temelin power plant in the south of the Czech Republic, Russian state-owned company Rosatom has suggested it could get the Kremlin to stump up the cash, with Moscow ready to accept partial ownership in the new units, or even a stake in CEZ itself, in return.

"We are ready to provide anything from a small part [of the financing] to 100%," said operational vice president of Rusatom Overseas, Leos Tomicek, reports Czech Position. "It is up to the Czech Republic to decide how much they want."

Rosatom, in partnership with Czech-Russian engineering company Skoda JS, is one of three bidders on the tender to construct the CZK200bn (€8.2bn) expansion. As Czech Position points out, the offer will put pressure on the other two bidders - France's Areva and US-based Westinghouse - which have to date both insisted they are interested solely in building nuclear power plants, not financing them or having a final ownership stake in them. The winner of the tender is due to be reported by the end of 2013.

However, Rosatom is also clearly concerned over the ongoing arguments in the Czech Republic over the ability of state-controlled utility CEZ to fund the Temelin project as well as its other commitments. Consistent questions over the basic economic viability of the project will not make funding any easier for the Czech giant to come by, especially given the current challenging environment in CEE banking.

Reports early this year that CEZ is lobbying hard to get guaranteed feed-in rates for the power that the new units at Temelin will produce adds grist to the mill, whilst CEZ is steadfast in its insistence that it can fund its entire investment programme itself. "These signals that CEZ might not have the financing for Temelin are very disturbing for us," Tomicek commented. "We have invested a lot of money in this project already."

At the same time, Russian financing, or even ownership, of such a strategic asset will go down like a lead balloon in the Czech Republic, as well as in Brussels and Washington. Meanwhile, nuclear power is one of the few major exports Russia has found success with in the last few years outside commodities, and Moscow is extremely keen to keep pushing that hi-tech, high-value avenue to diversify its economy. The Kremlin has offered 100% financing deals on NPPs to the likes of Belarus, Vietnam and Turkey recently.

Another signal of Moscow's determination to clinch the Czech tender is the appointment of Vladislav Surkov - credited as the architect of Russia's "sovereign democracy" - as head of the Russian-Czech inter-governmental trade and industry commission, which reported on March 20. Meanwhile, Sergei Kirienko, who has been Russia's main salesman of nuclear technology for the past few years as head of Rosatom, was tipped on March 19 to become the new Russian government's energy tsar. "We are taking part in nearly all the ongoing [nuclear] tenders around the world. We are talking with Hungary, South Africa, in Latin America, Vietnam and other countries in Southeast Asia," said Tomicek, adding that the Russian company has a target to increase the number of reactors constructed or being built from around 30 now to around 80 by 2030.

Tomicek said that a joint venture focusing on the third and fourth reactors at Temelin would be a possibility, although he also mentioned that Russia could seek a stake in CEZ itself. "There are many options," he said, adding that Rosatom could seek the necessary financing from the Russian state. The Rosatom representative said he believed Russian financing would not come to more than 49% of the cost of the new reactors, which would leave CEZ to find CZK100bn or so.

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