Areva to appeal again after CEZ refuses to allow it back into nuclear tender

By bne IntelliNews October 30, 2012

bne -

Areva announced on October 29 that it plans to appeal again and try to halt to CEZ's multi-billion-euro tender to build two new units at the Temelin nuclear power plant, after the Czech utility refused to allow the French company back into the tender.

CEZ announced earlier the same day it has rejected the initial appeal from Areva that followed the French company's elimination from the tender on October 5 for what are still unclear reasons. "In line with the public procurement law and after carefully assessing all factors, CEZ has decided not to accept [Areva's] objections," the Czech company - which also has offers from Toshiba's US subsidiary Westinghouse and a Russian consortium led by Atomstroyexport for the estimated CZK200bn-300bn (€8bn-10bn) project in hand - said in a statement. "Areva now has 10 days to file a proposal to review [CEZ's] steps with the Czech anti-monopoly office."

CEZ has not gone into specifics, saying only that its decision to dump Areva out of the tender involved both commercial and legislative reasons, which analysts say could mean anything from personnel issues to technical or legal problems.

Areva responded almost instantly, announcing that it is launching another appeal. "Considering [the] CEZ decision as baseless, the group has decided to appeal and to call for a suspension of the bid procedure," it said in a statement. The French company insists that it has had "no opportunity to clarify its offer or answer any questions and concerns CEZ might have had."

"Areva is now forced to take all legal actions available under Czech and EU laws with the objective of returning to the Temelin 3 and 4 tender process," the statement continued. "The first of these actions will be an appeal... that Areva will file with the Czech Office for the Protection of Economic Competition (UOHS), a body responsible for supervision of public procurement processes."

According to local media, Areva refused to set a fixed price for the contract or a completion deadline in its tender submission made in July. However, an Areva spokesman insists to bne that the company plainly stated in its submission a price for electricity produced by the new units. It also said that while CEZ flagged up nine issues with its offer, the Czech company failed to contact it on any of its concerns. Sources claim the two other bidders also had many issues raised over their offers, but they were given the opportunity to clarify these at meetings.

Controversy and political intrigue has hung over the process for months as the three competitors have sought to find a crucial advantage ahead of a final decision, which is set to be announced in late 2013. "I deeply regret Areva is being penalised based on matters that have never been discussed between the parties before, without any dialogue or clarification process," Areva CEO Luc Oursel said.

Areva and Paris are furious, understandably so since in some ways the French bid was superior to the others, not least because Areva is the only one whose reactor design, the EPR, is actually licensed in the EU. As such, there are questions about how far the French are willing to go, including measures that could bring the tender to a halt. Nucleonics Week, an industry publication, quoted a lawyer with Kinstellar in Prague as saying the appeal process could take "months or a year" and cast uncertainty over any CEZ negotiations with the rival bidders. Areva could ultimately file an injunction to stop the tender.

Given such high stakes, there are inevitably questions being raised about why CEZ should take the nuclear option and turf Areva out before the whole process is concluded some time in 2013. After all, if the decision-makers were committed to seeing the French bid fail at the last, they could've pointed to the major flaw in Areva's bid, namely that 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 Skoda JS and Gidopress, are offering two reactors with an output of around 2,200 MW.

Some point to the lack of political clout in Areva's bid. Areva officials have admitted to bne that it lacks the political lobbying heft of the Americans and Russians. Westinghouse has received strong support from the White House; the 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, has also 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. Neither of the other bidders are either willing or able to do this. This move by Rosatom is regarded by observers as crucial, 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.

Perhaps the answer, some accuse darkly, lies in the fact that certain segments of the Czech elite are committed to seeing the Russians win. Russian influence in the Czech economy is undoubtedly growing, smoothed by large sums of money, both legal and illicit.

None of this is particularly encouraging for those who want to avoid the Czech Republic's energy policy reverting to how it was 30 years ago - reliant on Russia.

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