Czech nuclear tender set for relaunch as Babis takes reins at CEZ

By bne IntelliNews July 8, 2014

Tim Gosling in Prague -



CEZ appears set to announce a new tender for the expansion of the Temelin nuclear power plant, after Finance Minister Andrej Babis followed up his recent takeover of control at the Czech utility by insisting two new blocs "certainly need to be built". At the same time, South Korea announced it has decided to submit a bid in any new tender.

After years of wrangling, CEZ scrapped the previous tender on the €10bn project in April after the government, which owns 67% of the company, said it would not offer price guarantees for purchasing power from Temelin. The company had long fought against analysts' insistence that the expansion made little economic sense, with speculation rife over the real motivation for the notoriously opaque utilities' enthusiasm, especially with European power markets in the doldrums. 

"CEZ should have made the decision to cancel the project a long time ago - it would have saved tens of millions of euros of shareholders' money as well as time and energy the bidders had to put in," Jan Ondrich of Candole Partners, a Prague-based advisory firm that has been a long, trenchant critic of the project, told bne at the time. "There is overcapacity in Europe and there is no need for large baseload generators. Power prices will likely stay low given expansion of wind and solar in Germany (albeit at slower pace), low hard coal and low carbon prices which we do not expect to reach relevant levels of €20-plus before 2021." 

However, CEZ CEO Daniel Benes insisted that the expansion of Temelin is necessary, and that he hoped to return to the issue in future; its a "future" that appears to have arrived remarkably swiftly. 

The increasingly powerful Babis told Bloomberg in an interview on July 7 that CEZ must make a decision on the project by the spring, and insisted the company must do its "homework", as the government expects to approve a long-term energy strategy before the end of 2014. "Two blocs certainly need to be built," the finance minister said, in remarks that appear to make the final decision on a new tender a formality. "This has to be planned 20 years ahead of time because of the lifespan of nuclear power plants." 

The accelerated about-face in "government" policy comes just days after Babis controversially took control of CEZ at a marathon shareholders meeting on June 27.

Seven members of CEZ's 12-person supervisory board were changed, with five new members being affiliated to Babis' ANO party, which was only formed in 2011 and came second in the parliamentary elections in October 2013. Only two new members of the supervisory board are deemed close to the Social Democrats (CSSD), the leading party in the coalition.

"Through his five representatives on the CEZ supervisory board Babis has gained an unexpectedly strong position – he's de facto gained control over this institution... This has shaken the coalition and there will be discussions on this topic," Zuzana Kubatova, an investigative journalist who has covered CEZ for many years told bne at the time.

It's notable that it was CSSD Prime Minister Bohuslav Sobotka that put the last nail into the coffin of the first Temelin tender in April. While the coalition is but a few months old, it has been plagued by infighting between the two main parties since before day one in office. In particular, the billionaire Babis has been looking to leverage his continued rise in personal approval ratings.

Yet he's not the first member of the Czech elite - and enemy of Sobotka - to believe the expansion of Temelin is so vital. President Milos Zeman also called for a new tender in April. A long-time supporter of nuclear power, although he has no formal power over the tender process he dangled the carrot of revived government support for the project should a new competition be called. 

Zemen also urged more bidders to join any new tender: after CEZ controversially ejected Areva from the last one, there only remained US-Japanese Westinghouse and Russia's AtomStroyExport-Skoda consortium. In particular, Zeman mentioned an unnamed South Korean company should be included, leading local press to note that he had recently met with a representative of Korea Electric Power Corp (KEPCO) as part of a South Korean delegation to the Czech capital.

Supporting the suspicion that a new Temelin tender is already a done deal, officials in Seoul said on July 8 that the government has "decided to join the bidding" on the Czech nuclear project, according to the Korea Times. State-run KEPCO will vie with at least two other bidders, they added, naming the US and Russian suitors from the last competition.

The South Korean government delivered its formal intention to join the process through KEPCO officials who participated in a Korea-Czech nuclear forum held in the European country in early June, according to the report. "Chances are high that KEPCO will win the rights," energy ministry official Chae Gyu-nam said. "The Czech government was very interesting in bringing Korea into the bidding process. This indicates our nuclear technologies and knowhow have been recognized internationally. We are making preparations thoroughly in order not to miss the opportunity."

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