Eurasia Press & News
Chinese, Russian, US and other firms are all in a race to bid to construct the first new nuclear plant in the Czech Republic in years that will have major political implications.
The Czech government hopes in the coming weeks to open negotiations with the EU to get a green light to construct a new reactor at its Dukovany II nuclear power plant costing some 6 billion euros, government officials told BIRN.
The country is finally moving ahead with long-delayed plans to expand its collection of nuclear plants.
But the race for the job of building the first new reactor in years is set to stoke geopolitical and domestic tensions, experts say.
Talks with Brussels will focus on the financial model for the project, which is being finalized by the government, and is expected to include “repayable financial aid” and an offtake contract – i.e. a loan to the state-controlled energy group CEZ and a price guarantee on power, Stepanka Filipova, from the Czech industry ministry, told BIRN.
“The government is not looking for cash,” Ondrej Houska, an editor at the Hospodarskenoviny broadsheet, explained.
“They know that’s impossible, especially with Austria and Germany so opposed to nuclear [power]. But if the Commission agrees to call nuclear an ‘emission-free source’, that should convince Brussels to be relaxed on the state aid issue and also help with private financing.”
It is widely accepted that building new nuclear capacity in Europe without significant state support is all but impossible.
The Czech government has spent years demanding that CEZ finance new nuclear capacity on its own. The government’s U-turn to offer financial support comes as it struggles to get new nuclear projects up and running. The Czech Republic’s long-term energy strategy states that expanding nuclear power is vital to ensure energy security while also reducing greenhouse gas emissions.
The strategy calls for the construction of up to four new reactors by 2040. But those ambitions are behind schedule. In May, the government announced it hopes to see construction of the first reactor start in 2029, going into operation by 2037.
On top of the deadline and cost problems that haunt any new nuclear builds, amid tightened security and safety requirements, the Czechs face two other hurdles: winning EU approval and navigating a geopolitical minefield in choosing a supplier.
‘Green Deal’ opens doors to more nuclear power
The government announced in late May that it will lend state-controlled energy group CEZ 70 per cent of the estimated cost of 162 billion crowns (6 billion euros) to build a new unit at Dukovany, one of the two Czech nuclear plants.
Together, they have six reactors: four in Dukovany and two in Temelin.
Minister of Industry Karel Havlicek told the media that he hopes the deal with CEZ, will be signed by the end of June.
The government says a tender should be announced by the end of the year, with the selection of a supplier due in 2022.
That would overcome a long stalemate. Six years ago, CEZ cancelled an international tender to build two new units at Temelin owing to the government’s refusal to offer support.
Since CEZ cancelled the Temelin tender in 2014, several suitors have been sitting in the background, waiting for a new competition to be announced.
Currently, it appears the Russian state company Rosatom, the favourite in the last race, will face off against China’s General Nuclear Power, Westinghouse, from the US, South Korea’s KHNP, and a Japanese-French joint venture, Mitsubishi Atmea.
The EU will keep a close watch on the transparency of the tender and funding deal, analysts say.
The first hurdle will be the EU’s state aid regulations, under which the government loan will be considered.
Prime Minister Andrej Babis told parliament last year that the new nuclear units must be built, even if it breached EU law.
But it now looks unlikely that he will have to go to war with Brussels over the issue.
During the negotiations in December last year about the European Commission’s “Green Deal”, which aims to cut emissions to zero by 2050, Babis negotiated a provision under which some countries can add nuclear power to their energy production in order to reduce their dependency on coal.
As Brussels showed readiness to recognise nuclear energy as “clean” – even if EU financial support for this kind of project is off the cards – Prague dropped its other objections to the Green Deal.
This has helped open the door for the long-awaited construction of a new nuclear reactor in the Czech Republic.
Modalities will first be negotiated with the EU in talks that will start this summer, Filipova, from the Ministry of Industry and Trade, told BIRN.
She added that the government hopes for a green light from Brussels, as the European Commission has already approved state aid for two nuclear projects in recent years: the UK’s China-financed Hinkley Point C, and Paks 2 in Hungary.
“The Commission is unlikely to go against a member state on this issue,” agreed Pavel Havlicek, an analyst at the Prague-based Association for International Affairs.
International tender with major external implications
“We are optimistic,” said Filipova, “but as with those other projects, it will be a demanding process.”
Given the value of the project, and its internal and external political implications, the main challenge will be the selection of a supplier.
The home country of the eventual supplier is likely to see its geopolitical influence in the Czech Republic increase.
Given that these countries enjoy the support of different Czech politicians, the selection of the contractor will have internal political consequences.
The inter-government deal on Paks 2 handed Russia the contract without a tender, with Moscow supplying a 10-billion-euros loan to Budapest.
Hungary finally won grudging EU approval for it in 2017 by insisting that as Russia built the original plant, only Rosatom could handle its expansion.
Prague watched that process closely and officials from the government and CEZ have in the past pushed for Dukovany, built with Russian technology in the 1980s, to copy the model.
Rosatom stated in 2017 that an open tender is not the best route to building new nuclear capacity in the Czech Republic.
In a written statement to BIRN, the Russian company stated that during consultations in February it provided CEZ with “information about … Rosatom’s business models”, adding only that it “would offer a model that will meet the conditions of the tender.”
However, there are conflicting media reports over who might be the favourite to win the tender.
Reports in some Czech media in May claimed Prague had drawn up rules to block “risky” suppliers that would oust the Russian and Chinese companies from the race.
“There are security interests that should guarantee that when awarding a contract, CEZ will not get someone who would be a strategic risk,” a source close to the tender preparations said.
Filipova confirmed that via “recent resolutions … the government has reserved the right to enter the tender or construction process whenever the security interests of the state are endangered”.
But she did not specify if that would rule out certain bidders, and Prime Minister Babis refused to discuss these reports when asked by BIRN.
Rosatom, however, insists that it is not deterred. “We have not received any official notification of this kind,” a spokesman wrote in an email.
“We are focusing on what is officially declared by CEZ and the Czech government and are ready to participate in the tender once it is announced.”
On the other hand, some Czech media reported in March that, rather than being blocked, Russia is in the box seat.
CEZ’s application in March to the Czech nuclear safety authority for permission to build two units at Dukovany included technical parameters that these reports claimed only Rosatom could satisfy: namely a 1,200MW reactor. CEZ dismissed this to BIRN as a “rumour” with “no substance”.
“We will be requesting a reactor with a capacity between 1,000MW and 1,200MW,” CEZ spokesman Roman Gazdik said.
“We had preliminary talks in February with all of the five prospective bidders and all of them have this kind of reactor or are currently working on a project to [develop one],” Gazdik added.
Foreign bidders can count on local allies
If the government really is seeking to oust Russia and China from the competition, the pair has powerful political allies in Prague.
The country’s populist president, Milos Zeman, since taking office in 2013, has sought to deepen ties with both eastern giants, pushing an “alternative foreign policy” that is at odds with the government’s stance that NATO and EU membership are the country’s cornerstones.
The resumption of the nuclear race will exacerbate that struggle. Nuclear technology is Russia’s only high added value export, and Rosatom’s overseas order book has boomed in recent years.
China, on the other hand, is eager to prove itself a reliable supplier and further strengthen its presence in Eastern Europe.
Analysts predict that the tender will increase urgency in longstanding efforts by Moscow and Beijing to raise their influence in Czech politics.
However, Prague’s wider political establishment is putting up increased resistance, and the position of pro-Russian and Chinese circles appears to have weakened.
The BIS security service, which has issued ever-more urgent warnings that Russian and Chinese operations pose a national security threat, is keenly interested in the nuclear race.
The US will also double down on recent endeavours to push back Russian and Chinese influence in Central and Eastern Europe.
Energy is a major focus of that effort, and has been top of the agenda during numerous official visits to the region since Donald Trump moved into the White House.
The geopolitical manoeuvring and domestic political tussle make it hard to call which way the Czech nuclear race will go.
On the one hand, it is believed that a consensus within Babis’ minority coalition government aligns with the outlook of the BIS.
On the other hand PM Babis remains dependent on Zeman and on parties linked to him for support in parliament, and often fails to stand up to the president – in public at least.
“Babis is increasingly close to the position of the security services,” Havlicek suggested. “But he also tends to avoid confrontation with Zeman and Russia, because it would cost him political points at home,” he concluded.
