James de Candole in Prague -

The Czech antitrust authority announced June 11 that it had fined the state power utility CEZ just €14,000 for wrongfully awarding in 2008 a €60m contract to build a nuclear fuel dump at the Temelin nuclear power plant to a shell company registered in Lichtenstein and represented by Russia’s honorary consul to the principality.

The Czech antitrust authority, in its wisdom, ruled that CEEI, as the shell company is called, was not qualified to enter the CEZ tender because it had no idea how to build such a structure, and should therefore have been disqualified at the outset.

It is a shame that CEEI’s business partners at CEZ did not know this at the time. Or did they?

The cost of design

CEZ will not appeal the ruling, and little wonder. The fine could have been 20-times higher. For the price of a used Audi A8, CEZ has got away with (at least for now) what appears to be criminally negligent behaviour – or worse.

How so? Much ink has been spilled on covering this case, but here is a quick summary. CEEI was awarded the prime contract for the nuclear dump because, according to Daniel Benes, the CEZ board director who negotiated and signed the contract with CEEI and the current chairman of CEZ, it was the only bidder that had the necessary German know-how. CEEI held a license from a German company called WTI to use its state-of-the-art design in the Czech republic.

In spite of the fact that CEZ had decided not to use the German know-how already at the time of awarding the contract to CEEI, paradoxically Daniel Benes went ahead with CEEI anyway, which suggests that that there were other reasons for selecting CEEI other than its WTI license. CEZ opted for a local design instead, which had the great advantage of being twice as expensive as WTI’s design. The cost of an equivalent dump in neighbouring Bavaria, Germany, also designed by WTI and completed a year earlier, was around just €30m.

CEEI then subcontracted the bulk of the work to PSG – a company that did actually know what it was doing. Indeed, Zlin-based PSG is one of the most reputable and oldest Czech construction firms, whose website shows experience in constructing projects in the energy sector.

And then there were three

There are at least three prominent businessmen who surely know who owns CEEI, but who refuse to say. These are Daniel Benes himself, who is today the chairman of the board of CEZ; Georg Buth, managing director of GNS, Europe’s leading manufacturer of the casks in which nuclear fuel is stored, a supplier to CEZ and the owner of WTI; and Vladimir Hlavinka, until early 2013 a board director at CEZ and its head of generation, and today the vice-chairman of PSG, the company that actually built the nuclear fuel dump at Temelin.

Buth has been the legal representative of GNS in the Czech Republic since February 2008. Any contracts that were made between CEEI and WTI went across his desk. It is inconceivable that he would have signed away his firm’s know-how to a design for nuclear fuel dump to some lawyer in Lichtenstein claiming to represent the real owner. But understandably, he does not want to mess his nest with a major customer like CEZ, and with its chairman Benes.

Hlavinka, in his capacity as head of generation at CEZ, claimed in 2010 that it was not possible to insist on knowing the true identity of the owner of CEEI, as this would have been discriminatory. This is risible. The owner of a nuclear power plant does not award a contract to build a reinforced concrete monolithic structure of over 100,000 square metres housing spent nuclear fuel and attached to the plant unless he knows the owner of the company, especially if the power plant is a short drive from his country’s national border with a sovereign state that opposes all nuclear generation.

PSG is a member of the Russian Rosatom MIR 1200 consortium, which is still hoping to build more nuclear power plants in the Czech republic. Like GNS, it does not want to soil its own nest by damaging relations with Benes and CEZ.

According to CEZ’s press office, CEZ has awarded contracts directly to PSG with a value of less than CZK10m (€364,320) in the last two years, small change in other words. The press office is unable to reveal, however, the value of the work PSG has received as a sub-contractor on contracts placed by CEZ with other firms.

So if Rosatom were to be awarded a contract to build a new reactor bloc at Temelin, and PSG were to become a sub-contractor to Rosatom, CEZ's press office could not tell you the value of PSG's sub-contract. In other words, that figure of CZK10m mentioned earlier may or may not be indicative of the true extent of PSG's business relationship with CEZ. We have no idea of the value of PSG's contract with CEEI.

Neither Benes nor Buth are able to recall with whom they were really doing business when they signed their separate contracts with CEEI. And Hlavinka apparently never asked, for fear of apparently discriminating against the owner of a company that would be crawling all over his precious nuclear power plant. All three of them deny any knowledge of who owned CEEI, the company they worked with for some three years in the period 2008-2010.

And now these nuclear industry giants have been made to look like buffoons by the humble Czech antitrust authority, which, six years after the event, has dared to point out that their business partner, CEEI, had no idea what it was doing.