Westinghouse teams up with Metrostav for Czech nuclear tender

By bne IntelliNews January 31, 2012

bne -

The rush by the international firms participating in the Czech Republic's huge nuclear tender to line up local partners as a way to sweeten their bids reached a new level January 30, when Westinghouse Electric Company announced an exclusive partnership agreement with the country's largest construction company Metrostav.

The prime civil contractor is the most vital partner in any nuclear power plant project, with the proportion of the total price related to construction exceeding a third, so it's significant that Metrostav has plumped to join the bid from the US company (which is now a subsidiary of Japan's Toshiba) to build two new nuclear units at CEZ's 2-gigawatt Temelin plant. "We believe that [Westinghouse's] AP1000 technology has the chance to succeed in the bidding procedure, but primarily we have received a highly attractive and lucrative offer from Westinghouse," Pavel Piat, who sits on the board of Metrostav, told a press conference, adding that this exclusive deal as a partner essentially "closes the door" for the company to act as a subcontractor should Westinghouse's bid fail.

Westinghouse clearly believes having such a politically connected and financial heavyweight as Metrostav on its side will help in its battle against France's Areva and a Russo-Czech consortium led by Atomstroyexport to win the contract to build the two reactors at a cost of CZK200bn (around €8bn). "You all know Metrostav as a very large and well-established organisation with a very impressive track record on complex power plants in the Czech Republic," Yves Brachet, Westinghouse's president for Europe, the Middle East and Africa region, said. "As the only Czech-owned constructor on this scale and with this track record, Metrostav brings both construction excellence and local knowledge and capabilities."

While Metrostav is certainly big - Metrostav is by far the most successful company as far as winning government construction deals in a series of dubious tenders, several of which have had to stopped and held again - its record for safety and cost-effectiveness is less obvious.

The company's current main project is the massive Tunel Blanka complex that's designed to relieve surface traffic in Prague. In 2011, Metrostav revealed the price for this had shot up 20% to CZK36bn at least and won't be completed until 2014 at the earliest. The Czech Mining Office in 2010 fined Metrostav CZK1m for the collapse several times of one of the road tunnels. And a part of the tunnel complex, the Troja Bridge that spans the Vltava river, has seen its price increase almost three times to over CZK1bn and in November it was revealed the anti-corruption police are looking into the project on suspicion of fraud.

As is construction companies' wont, Metrostav blames these lapses on changing parameters by the government and lax subcontractors. "There was definitely no negligence on our part," Piat said indignantly.

The problem of sub-par subcontracators, argues Brachet, would be eliminated by Westinghouse's deal, as Metrostav is the sole contractor.

Local heroes

This parceling out of work to local companies - summed up by Westinghouse's slogan, "We buy where we build" - is considered key by all the bidders in trying to convince the Czech government to award them the contract sometime in late 2013. Binding bids need to be in by July.

Westinghouse's deal to partner up with Metrostav follows a similar exclusive deal with I&C Energo and a non-exclusive memorandum of understanding with Vikovice - both Czech companies.

Atomstroyexport and Gidropress, which are both controlled by Russian nuclear holding Rosatom, and its Czech partner JS Skoda (which is now owned by Russian engineering firm OMZ) are lining up Michal Å tefl's OHL construction company as a partner, according to local sources. And in December, Russian President Dmitry Medvedev visited Prague and oversaw the signing of a raft of contracts in the power and transport sectors beyween Czech and Russian firms worth at least €2.15bn: Czech Alta Invest agreed with nuclear fuels producer TVEL to establish a joint venture to supply nuclear fuel and related services to the European market, and also signed a contract with Uralmetanolgroup to build a methanol production plant in the Sverdlovsk region. Three other Czech companies secured multi-million-euro contracts to work on power plants in Russia.

Areva on November 30 said it's "in close negotiations" with Vitkovice Machinery on a inking a cooperation agreement, with a target of finalising this during the first quarter of 2012. "Vitkovice Machinery Group will be a key partner and supplier for Areva within the Temelin tender and also in its global supply chain in markets it can efficiently compete," Areva said in a statement.

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