Bulgaria

WESTERN BANKS CONTINUE TO WITHDRAW THEIR INTEREST FROM THE PROJECT

(December 15, 2006) 30 October 2006, the Bulgarian utility NEK announced that a consortium of Russian Atomstroyexport and French / German Areva NP (Areva and Siemens) has won the tender for building the Belene Nuclear Power Station in the north of the country.

(650.5773) WISE Czech Republic - On a press conference a day later, NEK in the presence of Bulgarian Energy and Economy Minister Ovcharov gave further details. Atomstroyexport / Areva NP are to build a completely new AES-92 power station, using two VVER 1000/B466 reactors. The contract price is foreseen to be 3,997 Billion Euro and the reactor should have a 60 year life-time. Atomstroyexport / Areva NP said to be able to construct the first block in 6,5 years after start of construction and deliver the second block a year later. The reactors are according NEK to deliver electricity for 3,7 Euro cent per kWh. Over 200 experts from eight countries were needed to judge the proposals.

The Atomstroyexport consortium won the tender over the Czech Skoda Alliance consortium that budgeted 4,098 Billion Euro for the same configuration. Both Atomstroyexport and Skoda Alliance leader Skoda JS are majority owned by the Russian State and the Russian state company Gazprom, which makes it likely that the offers have been coordinated. Former Kozloduy director and current researcher at the Vienna Institute for Risk Analysis Georgi Kasschiev, who also blew the whistle on the INES 2 incident in the Kozloduy nuclear power plant earlier this year, criticised the choice as binding Bulgaria to nuclear power dependency on Russia. Russian's head of the Federal Agency for Nuclear Power called the choice a "big day for Russia" and he added that "Russia is now returning to the European nuclear power construction market."

New reactors
NEK argued its choice of two completely new reactors over finishing the already existing basis for VVER 1000/320 reactors with a higher chance on acceptance of these new reactors in the European Union. During an intensive information campaign preceding this decision, a coalition of Bulgarian and international NGOs had made clear to the public, interested banks, the EU and the Bulgarian government that the VVER 1000/320 would not be able to receive an operation permit in Germany because of safety concerns. They also had pointed to the bad track record of Skoda Alliance in Temelín in the Czech Republic.

The AES-92 has not been licensed before in Europe. At present Atomstroyexport is constructing an AES-92 power plant in Kudankulam in India, where construction started in 2001 and the first block is supposed to be loaded and become critical in 2007 with the second to follow two years later. The AES-92 is presented by Atomstroyexport as a Third Generation reactor. It is a further development of the VVER 1000/320 model, fitted out with an extra strong containment with stainless steel lining and a core-catcher.

Budget and construction time overdraws to be expected
The total building costs of the Belene NPP have not been made public. The almost 4 Billion Euro contract budget only represents the construction by Atomstroyexport. It does not include preparation costs, infrastructural works and an interim nuclear waste storage to be built on or near the site. Although Atomstroyexport mentioned a construction time of 6,5 to 7,5 years after start of construction, Bulgarian authorities spread the impression that the first block would be able to go on-line in 2013. It is not clear whether still to be expected delays because of a new Environmental Impact Assessment and running court cases started by Bulgarian citizens and environmental organisations are taken into account. Greenpeace and WISE / NIRS consultant Jan Haverkamp expects adaptations of the AES-92 to European standards, as well as the new involvement of Areva NP in the construction to lead to large delays and therefore called the estimated building time of 6,5 years as highly optimistic.

Over 2000 Euro / MW installed
The 4 Billion Euro value of the contract came as a surprise, which even forced Greenpeace and WISE / NIRS to adapt their October 30 comment of the project being "Russian, fast and cheap" after the October 31 press conference to "Russian, slow and expensive". Earlier this year prices were mentioned of around 2,7 Billion Euro with rumours that Atomstroyexport had made an offer for 2 Billion Euros. The reason for this high budget can be found in the choice for completely new reactors. Atomstroyexport is to dismantle the already built parts of two VVER 1000/320 blocks on the Belene site and is allowed to use these parts in Russia as spare parts for reactors there. These parts represent a value of several hundreds of millions of Euros. Taking this into account sees the Belene NPP roughly equalling the investment costs of the Finnish Areva built EPR reactor on well over EUR 2000 / MW installed.

Belene a financial nightmare
Financing the project appears to be a major problem for Bulgaria. After the Bulgarian government announced early October that NEK was going to own Belene for 51%, the financial broker Standard & Poor's directly downrated the company from "developing" to "negative" with Belene as reason. But also banks that had been claimed as interested by Bulgaria's Economy and Energy Minister Rumen Ovcharov withdrew their interest. This includes the Bayerische Landesbank, Commerzbank, Société Génerale / Komercni Banka, KBC / CSOB, Deutsche Bank and UniCredit / HVB / Bank Austria - Creditanstalt. These banks did so after they had been informed by Greenpeace, WISE/NIRS and CEE Bankwatch about the risks involved to the project. Risks mentioned next to financial ones included the fact that the NPP is to be built in a seismic active area, that the EIA - which denies this fact - knows large flaws and is already two years under court procedures, and that it is likely that Belene, once coming on-line, will have to face a highly dynamic saturated market. The banks argued their rejection of the Belene NPP project with economic reasons as well as the fact that the project does not fulfil their strict sustainability criteria. A coalition of NGOs approached UniCredit / HVB / BA-CA on Friday the 13th of October in 23 countries to bring the message across. Pressure on the UniCredit Group continuous to prevent the bank from participating in other future nuclear projects like Mochovce in Slovakia and Cernavoda in Romania.
On the October 31 press conference a group of six more banks, Euratom and the European Investment Bank were mentioned as source of finance. Deutsche Bank a day later confirmed to Greenpeace that it featured falsely in that list and definitely had no interest in the project. The other five banks, Credit Suisse, BNP Paribas, JP Morgan Chase, Merrill Lynch & Co. and the Lehman Brothers Bank were contacted early December by Greenpeace and CEE Bankwatch with information on the risks involved in Belene.

Euratom
The Bulgarian Government made an aggressive publicity run with the claim that Euratom was going to finance 300 Million Euro from the Belene NPP budget. Euratom spokes people denied towards Greenpeace that any application had been received, nor any communication had taken place to this respect. Mark Johnston of the Greenpeace EU Unit: "Someone is lying here."

Russian banks not sufficient
Next to the mentioned banks, the Bulgarian authorities mentioned interest from a Russian pool of banks, including Gasprombank, Sberbank, VTB and Vnesheconombank, with an export guarantee from the Russian state. Observers note, however, that it is likely that this group will not be able to cover the full 4 Billion Euro budget and that Western capital will be needed as well.

Source and contact: Jan Haverkamp, consultant for WISE Czech Republic. Nad Borislavkou 58, CZ - 160 00 Praha 6, Czech Republic.
tel./fax (home): +420.2.3536 1734 / mobile: +420.603 569 243
E-mail: jan.haverkamp@wisebrno.cz

EUROPEAN PARLIAMENT DISMISSES CALL FOR "FLEXIBILITY"

(December 15, 2006) The European Parliament stopped on 30 November attempts from Bulgarian and pro-nuclear politicians to create uncertainty about the final closure date of the Kozloduy blocks 3 and 4. With 269 against 264 votes, the Parliament reiterated its call on Bulgaria to close the two blocks before Bulgaria's EU accession on 31 December 2006 midnight.

(650.5767) WISE Czech Republic - Parliament rapporteur on Bulgaria, British MEP Geoffrey van Orden, tabled a text in Bulgaria's EU accession progress report in which he called for flexibility concerning Kozloduy 3 and 4's closing dates. A few days before the EP plenary threw out the text, the Foreign Commission had accepted it, which was extensively covered and celebrated in the Bulgarian press. Already in March of this year, van Orden tried to smuggle a similar text in his progress report. Also this text was voted out by the plenary of the European Parliament.
When talks about EU accession started with Bulgaria in 1998, the country had to promise to close its four VVER 440/230 reactors in Kozloduy as they were considered too unsafe for upgrading. The EU allowed, nevertheless, a phase-out time provided that certain upgrades would be carried out. End 2002, the blocks 1 and 2 were taken from the grid, switched off and mothballed.

Irreversible closing of block 1 and 2
Many Bulgarian politicians and people from the nuclear energy sector, including consecutive directors of the Kozloduy nuclear power plant, did not like the closure of the reactors and sometimes secretly, sometimes very vocally even held hopes for a re-start of the blocks 1 and 2 as soon as Bulgaria would have entered the EU. Last summer, however, the European Commission heavily criticised Bulgaria for not making the closure of block 1 and 2 irreversible and Bulgaria had to promise steps to do so. A request by Greenpeace for information on concrete measures last September was refused and is currently awaiting court decision. On 7 December, the chairman of the Nuclear Regulatory Agency in Bulgaria amended the operation licences of block 1 and 2 so that certain vital components can be removed from the reactor. It is not clear, however, whether this would constitute an irreversible closure.

MEPs as lobby
The Bulgarian media give the impression that there has been a years long debate about whether final closure of Kozloduy 3 and 4 should be postponed. Inspection visits of IAEA and WENRA (a non-governmental organisation comprised of the Heads and senior staff members of Nuclear Regulatory Authorities of European countries) were said to have declared the reactors safe enough to operate for a longer time, even though the relative superficial inspections only gave conclusions about operability on that moment. Every visit or sentence from pro-nuclear MEPs like former Scottish Social Democrat MEP Tony Wynn in favour of Kozloduy found wide attention in the Bulgarian media. Voices from, amongst others, Green MEPs during their visits to Bulgaria were hardly covered, if at all. They argued that Kozloduy closure postponement had no chance because it would need a change in the Accession Treaty, an act that needs unanimous support from all present 25 EU Member States. Several countries would veto any prolongation of the lifetime of these dangerous reactors. The distorted media attention lead to a ground-swell in public opinion believing that the European Parliament could and would keep Kozloduy open.
After Wynn left the Parliament after the last elections, his torch was taken over by EPP-ED fraction (Christian Democrats, by far the largest political group in the EP) members Finnish MEP Eija-Riitta Korhola and Slovenian nuclear lobbyist Romana Jordan Cizelj, and the Socialist Edit Herczog from Hungary.

Panic in the Balkans
The last months saw a spreading panic in the entire Balkan region, allegedly because closure of Kozloduy 3 and 4 would lead to energy shortages. In order to prevent unrest in Bulgaria itself, Energy and Economy Minister Rumen Ovcharov reported that there would be no problem for Bulgaria, but that Bulgaria's electricity export clients Serbia, Macedonia, Montenegro, Albania and Greece might suffer. Macedonia's grid operator MEPSO picked up the argument, diverting attention from its own grid management problems.
In Bulgaria itself a heated debate ensued about whether the closure of Kozloduy 3 and 4 would lead to price increases. On 6 December, the head of the state energy regulator told that prices for households will remain unchanged until July.

Turkey seeking Bulgarian electricity imports
Turkey approached Bulgaria to buy electricity from 2007. It offer as much as 5,7 cent/kWh. It is as to date unclear whether Bulgaria is going to export to Turkey next year or not. If so, this might be a shift of export capacity from the Balkan countries to the East because of price reasons.

Fishing for money
Some observers state that the games around Kozloduy 3 and 4 are played in order to get support for the Belene NPP project, possibly in the form of a Euratom loan. Others point at the requests now made by the Bulgarian government for higher compensation for the "loss" of Kozloduy 3 and 4. Where others would argue that Bulgaria has received already a very lucrative bonus with the EU permission to run the outdated Kozloduy reactors for the last eight years while exposing its population and the rest of Europe to risk, Bulgarian authorities with the help of IAEA calculations argue that Kozloduy could have given Bulgaria still hundreds of millions Euro of income if allowed to continue running even further. They try to claim this from the EU.

Concluding it has to be noted that Bulgaria and its electricity clients had eight years to prepare for Kozloduy 3 and 4's closure. The fact that Bulgaria could export electricity over the last years was mainly because replacement capacity for Kozloduy 1 to 4 was timely developed. The games in the European Parliament and the panic on the last moment seems to be created with other aims in mind. One thing we probably can be sure of: each glitch in the grid in the coming months or even years will probably be blamed on Kozloduy's closure and not on failing grid management.

Source and contact: Jan Haverkamp, consultant for WISE Czech Republic. Nad Borislavkou 58, CZ - 160 00 Praha 6, Czech Republic.
tel./fax (home): +420.2.3536 1734 / mobile: +420.603 569 243
E-mail: jan.haverkamp@wisebrno.cz