Othon Luiz Pinheiro da Silva, the former CEO of Brazil's nuclear power company Eletronuclear was formally charged on September 1 with accepting bribes. Reuters reported that Pinheiro allegedly took bribes totaling 4.5 million reais (US$1.1m; €1m) from construction and engineering firms involved in the construction of the Angra 3 nuclear power plant.1 The figure could be as high as US$10 million according to Associated Press.2
The payments were allegedly made to fix the bidding process and increase prices for work on the Angra 3 reactor under construction 100 km west of Rio de Janeiro. Pinheiro has been in jail since July 28, and in early August he resigned as CEO of Eletronuclear, the nuclear subsidiary of state-run utility Eletrobras. Eletronuclear operates Brazil's two nuclear power reactors and is building Angra 3 with the help of French nuclear utility Areva and numerous smaller construction firms.
Pinheiro, a retired navy admiral and nuclear engineer, has for decades been at the forefront of Brazil's programs to develop nuclear power, an aborted nuclear weapons program when Brazil was under military rule, and ongoing plans to build submarines including one nuclear-powered submarine. The submarine tendering process is under investigation.3
Fourteen other people, including Pinheiro's daughter Ana Cristina Toniolo and six construction firm executives, were also charged with crimes such as money-laundering and offering or receiving bribes.1 In addition to the arrests, 'Operation Radioactivity' involved the execution of 23 search and seizure warrants according to a federal police statement.14
"The arrest is a tragedy for the industry," said Luiz Pinguelli Rosa, a nuclear physicist and Eletrobras' chief executive from 2003 to 2005. "The industry was already in crisis, but now the corruption concerns are bound to delay Angra 3 further and cause costs to rise even more."4
The Angra 3 project has descended into farce:
Eletronuclear reported a loss of 1.36 billion reals (US$340 million) in the June quarter, with the largest contributor to the loss being a provision for contingencies on lawsuits against the utility.
Corruption pervasive in the energy sector and beyond
The scandal extends beyond the nuclear industry to the entire power sector and the oil and gas industries ... and beyond. The prosecutors' charging document states: "The cartel naturally expanded using the same modus operandi and the same companies (as in the case of Petrobras) to take part in Eletronuclear tenders."1
Petrobras has written off more than US$2 billion in corruption-related losses.3
In addition to executives from the oil, construction and electricity industries, some politicians face charges including the leader of the lower house of Congress and a former president.1
A public opinion poll found that 60% of respondents want Brazilian President Dilma Rousseff impeached over the widespread corruption. Standard & Poors said the arrest of Pinheiro was another "political uncertainty" that caused the agency to change Brazil's credit outlook to negative.7
Alexandre Barros, a political risk consultant with the Brasilia-based firm Early Warning, said the Eletronuclear scandal was indicative of broader patterns of corruption in state-run companies, and raised the spectre of a return to military rule: "Schemes like these have long been part of our culture and I think other similar schemes start emerging all over the place. My big fear is that the armed forces may start feeling uneasy."2
History of underachievement
Brazil's nuclear power industry has a history of underachievement. The decision to develop nuclear power was taken by the 1964−1985 military dictatorship. A covert nuclear weapons program was also pursued. Public debate was not tolerated. "Protesting against nuclear energy was like protesting against the government, which meant prison, torture or death," said ecologist Vilmar Berna.8
The Angra 1 reactor suffered ongoing problems with its steam supply system and its load factor over the first 15 years was only 25%.9 The most recent problem with Angra 1 occurred in February 2015, when the reactor was temporarily shut down after a failure of the capacitors used to cool steam.10
Work on Angra 2 began in 1976 but the reactor did not commence operation until the year 2000.
Work started on Angra 3 in 1984. Around 70% of the equipment was delivered, but full construction did not begin and work on the project was suspended in 1986. In November 2006 the government announced plans to complete Angra 3 and construction began in June 2010. Operation was anticipated in 2015, but now there is considerable doubt as to whether the new 2019 start-up date can be met (or if the project will be completed at all). The total estimated cost for the project is US$7.59 billion, substantially greater than earlier estimates.9
"The goal of 2019 will be very hard to meet. And the other plants, who knows?" said Claudio Salles, president of Instituto Acende, a Brazilian energy-research group in Sao Paulo. "These plants take 10−15 years to build and as time goes on they become less viable."4
Ildo Sauer, a nuclear physicist who worked under Pinheiro in the late 1980s and a former head of Petrobras natural gas' division, says Brazil's nuclear program is too expensive and has been co-opted by politicians and construction and engineering firms. "The problem is the lobbyists who see nuclear as a chance to build expensive megaprojects with little regard for cost. It's no longer about science or energy. It's about politics and money, and that brings corruption."4
Private sector
No private investment in nuclear power is allowed in Brazil, though this is under review. In May 2015 the government said that Angra 3 would be the last nuclear power plant built as a public project, opening the way for private equity in future reactors.9
In early 2015 energy minister Eduardo Braga said that he was looking for private sector investment for another four reactors. The government plans to allow private companies to bid for the construction of reactors with financing guarantees of future revenues.11
Pro-nuclear commentator Dan Yurman wrote: "Any private sector vendor that planned to step up to financing and building four new nuclear reactors, worth [US]$25−30 billion, might find a steep challenge in keeping the construction venues free of people with real or imagined influence coming out of the woodwork with their palms stretched out. U.S firms, which face potential prosecution under laws that prohibit giving bribes for contracts, would need to spend serious time with their legal advisors before venturing into the Brazilian market. Where Brazil is going to get private sector vendors to take on $5−10 billion projects is anybody's guess."12
In any case the commitment to build more reactors is half-hearted. In May 2012 the government said that construction of any new plants would not commence until after 2020.9 The government's 'Decennial Energy Plan 2022', released in late 2013, made no mention of nuclear power plans other than Angra 3.13
In 2012, gross electricity production in Brazil was 553 billion TWh, with 75% from hydro; 14.5% from gas, coal and oil; 6% from biomass and wastes; 3% from nuclear; and 1% from wind and solar.9
Pinheiro said in 2013 that nuclear power's share should not grow much beyond 4%, because hydropower and other renewable sources will meet rising demand.8
Power from Angra 1 and 2 at about US $75/MWh is about 1.5 times more expensive than that from hydro, and power from Angra 3 is expected to be slightly over twice as expensive as hydropower.9
References:
1. Reuters, 1 Sept 2015, 'Brazil charges ex-CEO of nuclear power company with taking bribes', www.reuters.com/article/2015/09/01/brazil-corruption-eletronuclear-idUSL...
2. Associated Press, 28 Aug 2015, 'Police ask that charges be filed against former head of Brazil's nuclear power company', www.foxbusiness.com/markets/2015/08/28/police-ask-that-charges-be-filed-...
3. Reuters, 29 July 2015, 'Brazilian police probe nuclear submarine program - Folha', www.reuters.com/article/2015/07/29/brazil-petrobras-submarines-idUSL1N10...
4. Reuters, 30 July 2015, 'Brazil Nuclear Leader's Arrest May Stymie Atomic Ambitions', www.voanews.com/content/brazil-nuclear-leader-arrest-may-stymie-atomic-a...
5. WNN, 29 June 2015, http://us1.campaign-archive2.com/?u=140c559a3b34d23ff7c6b48b9&id=7b66592e5d
6. Reuters, 3 Sept 2015, 'Eletrobras suspends Angra nuclear contract as contractors quit', www.trust.org/item/20150903004211-npgl2/
7. Dan Yurman, 2 Aug 2015, 'Rocky times for nuclear executives in Japan, Finland, & Brazil', http://neutronbytes.com/2015/08/02/rocky-times-for-nuclear-executives-in...
8. Fabiola Ortiz, Dec 2013, 'Nuclear Energy Small but Strategic in Brazil', www.ipsnews.net/2013/12/nuclear-energy-small-strategic-brazil/
9. World Nuclear Association, Sept 2015, 'Nuclear Power in Brazil', www.world-nuclear.org/info/Country-Profiles/Countries-A-F/Brazil/
10. 20 Feb 2015, 'Brazil's Nuclear Power Plant Angra 1 is Shut Down After Failure', www1.folha.uol.com.br/internacional/en/business/2015/02/1592284-brazils-nuclear-power-plant-angra-1-is-shut-down-after-failure.shtml
11. Reuters, 27 May 2015, 'Brazil sees expanded private role in nuclear power - minister', www.reuters.com/article/2015/05/27/brazil-energy-nuclear-idUSL5N0YI4DU20...
12. Dan Yurman, 7 June 2015, 'Four major nuclear deals with a lot of waiting ahead', http://neutronbytes.com/2015/06/07/four-major-nuclear-deals-with-a-lot-o...
13. Togzhan Kassenova, 2014, 'Brazil's Nuclear Kaleidoscope: An Evolving Identity',
http://carnegieendowment.org/files/brazil_nuclear_kaleidoscope_lo_res.pdf
14. Reuters, 28 July 2015, 'Update 4 − Two Brazilian executives arrested as Petrobras probe hits utility, www.reuters.com/article/2015/07/28/brazil-petrobras-eletrobras-idUSL1N10...