The Czech government has approved a preliminary plan for the state owned nuclear utility CEZ to build a new nuclear power station at the existing Dukovany site.

According to a report by World Nuclear News, the government, Elektrárna Dukovany II, a company which will be wholly owned by state-controlled power group CEZ, is to be responsible for the expansion of the Dukovany nuclear power station. A tender for the project is expected to be organized at the end of 2020. The subsidiary will assume all the risk of the project.

The government has also committed to provide financing and political guarantees for the project. This is a 180 degree change from the previous policies of the government which promised neither financing nor long-term stability on terms of policy governance.

The government said it will conclude an agreement with CEZ which will guarantee the company can obtain financing for its project at the same borrowing rates as the Czech state. The main mechanism will be loan guarantees.

The Czech Republic has pledged to guarantee the stability of the legislative and regulatory environments and provide possible compensation for any changes in these environments.

Barriers to the Plan

The government said it will not provide guarantees on future power prices by way of a contract for difference as used by the UK government for the Hinkley Point C project in England.

The lack of rate guarantees is likely to scare off investors who have only to look at the closings of merchant plants in the U.S. to understand why this won’t work.

Minister of Industry and Trade Karel Havlicek reportedly said at a press conference in Prague following a cabinet meeting that the government is “moving from the stage of talking about constructing new nuclear capacity to taking specific steps to prepare for new capacity”.

The UK’s CfD model guarantees a minimum price for electricity produced by the plant. However, the Czech approach appear to be to pass the business risk of building new reactors on to the utility’s subsidiary which is made more tenuous by the potential for volatility in rates.

A statement by the Czech ministry of industry and trade said the country will have to negotiate the terms of the chosen financing model with the European Commission to make sure it fits the rules of the internal market.

The EU, pushed into this stance by the anti-nuclear government in Austria, has attempted to intervene in new nuclear builds if it thinks the plants are being “subsidized” by rate guarantees. Yet, in addition to the Czech Republic, Romania, Bulgaria, and Poland are all considering new nuclear plants.

The Czech government will provide CEZ, which is 70% state-owned, with loan guarantees to help it secure cheaper financing. The guarantes are not subsidies since the CEZ subsidiary will undoubtedly have to pay an insurance premium for the loan guarantees.

Another barrier is that CEZ may have to buy out the 30% stake in the mostly state owned utility to prevent threats of lawsuits from investors who think new nuclear plants are too risky even with a subsidiary taking on the risk. The valuation of that 30% equity stake will likely be contentious as investors seek to profit from an offer to cash out.

Special Working Group to Estimate Costs

Estimating the cost of getting ready to build is being assigned to a special working group. The government approved an increased budget for the ministry to prepare for nuclear plant construction, including a team of advisors to its special envoy for nuclear energy, Jaroslav Míl, for the period 2019-2022.

Míl’s advisory team will have five members, who are describd as “renowned experts” in the field of nuclear energy and construction. They are: Jan Vacík, Vojtech Michalec, Jaromír Novák, Vladivoj Rezník and Jana Siegerová.

Could CEZ USe the Regulated Asset Base Method to Finance the Project?

It isn’t clear whether the Czech government is familar with or has looked into the RAB method (key policy paper) being considered in the UK to fund new nuclear builds. RAB financing is essentially a type of contract drawn up with the backing of government, which calculates the costs and profits of a project before it is started, and allocates an investor’s profits from day one.

For a detailed and expert explanation of the RAB method see also this OECD paper available online in PDF or text version. It compares the RAB model with other forms of capitalization of major infrastructure projects.

In summary the way it works is that government regulator sets a fixed number, the RAB, which attempts to account for all the future costs involved in the completion of a project. The regulator then also sets a fixed rate of return for the investors based on those costs. The UK government is considering using it to finance the Wylfa nuclear plant.

Decision Timeline for Dukovany

A decision on construction of a unit at the Dukovany site is still years away with suppliers expected to be chosen by 2024. First, one new reactor of at least 1200 MW would be built at the existing Dukovany site to replace the four units in operation there that are expected to be permanently shut down between 2035 and 2037. There are four Russia-designed VVER-440 reactor units at the Dukovany site. The government also expects to add new capacity at CEZ’s Temelín site.

The statement said the government sees the construction of new nuclear capacities as a way of ensuring energy independence and security of energy supply.

See prior coverge on this blog – Czech CEZ to Try Again for New Nuclear Tender

CEZ to Leave Foreign Markets

(Reuters) Czech utility CEZ plans to sell assets in Bulgaria, Romania, Turkey and Poland in order to focus on its home market, the chief executive told the daily Hospodarske Noviny.

The plans would be a further shift by majority state-owned CEZ towards retrenching in the Czech market after a Balkan expansion that ran into trouble in some markets.

“Within the framework of this new strategy, we have an ambition to leave Bulgaria in the coming years,” Chief Executive Daniel Benes told the daily in an interview.

“We are considering an exit from Romania, from Turkey, and we are thinking about leaving Poland, where we have two coal-fired power plants, as part of lower CO2 emissions in the group.”

Other Nuclear News

Poland Says New Nuclear Capacity of 6 Gwe has a $30 Billion Price Tag

(Reuters) – Poland will probably need $30 billion or more by 2040 from foreign investors to build its first nuclear power station, Energy Minister Krzysztof Tchorzewski said in a statement to wire services.

Poland, which generates most of its electricity from coal, plans to build a nuclear power plant with a capacity of 6GWe – and an option to expand it to 9GWe – to reduce carbon emissions and secure power supplies.

The energy ministry has said it expects the first unit of the plant, with a capacity of 1.0-1.5 GW, to be ready by 2033, with the whole 6-9 GWe project completed by 2043.

Assuming the “overnight cost” of the reactors can be kept competitive at $4,000/Kw, a 9,000 MW capacity would cost $36 billion for the power stations.

“Investors are needed for around $30 billion, however this money would be provided over 20 years”, Tchorzewski told reporters, adding the whole investment was estimated at around $60 billion.

It’s not clear what the additional costs are for the power plants. Grid development and total life cycle costs including fuel and spent fuel management may be the key factors.

Several vendors of small modular reactors (SMRs) have looked at Poland as a possible market for their reactors. NuScale has published data which indicates the firm believes it can deliver its 50 MW SMR at $4400/KW.

See prior coverage on this blog – Poland Sets Plans for Nuclear Energy

Bulgaria Starts Search for Investors for Belene Nuclear Power Plant

(NucNet): Bulgaria has published a call for interest for potential investors in the two-unit Belene nuclear power station project in the Official Journal of the European Union, starting an investor selection procedure first announced in March.

In March, Bulgarian state energy company NEK said it would be looking for an investor for the construction of Belene with options to take a minority stake in a future project company or purchase electricity to be generated by the facility.

The call for interest was published on May 22. Interested parties now have 90 days to apply and 12 months to complete the procedure.

NEK has said it will participate in the project company by contributing assets including the licensed site, nuclear island equipment, permits and documentation.

According to the call for interest, the new nuclear station must be operational within 10 years of the signing of an investors’ agreement and its cost must not exceed €10bn for both units.

In 2008, Bulgaria ordered two Russian VVER-1000 pressurised water reactor units for Belene, but the project was cancelled in 2012 because of financial and political considerations. In June 2018, the government formally revived the project following a vote in parliament.

A 2016 arbitration settlement awarded Bulgaria most of the nuclear equipment already produced by Russia for Belene under the 2008 agreement. Bulgaria paid Rosatom for the equipment.

France’s Framatome, China’s CNNC, Russia’s Rosatom and US-based General Electric have already formally expressed an interest in investing or providing equipment and services for Belene. Talks have also been held with South Korea’s Korea Hydro and Nuclear Power.

Bulgarian officials have said that if Bulgaria goes ahead with the Belene project Russia’s Atomstroyexport will be the main contractor.

Barakah / UAE Regulator Certifies First Group Of Operators

(NucNet) The United Arab Emirates’ Federal Authority for Nuclear Regulation (Fanr) officially certified the first group of reactor operators for the Barakah nuclear power station, a statement by the regulator said.

According to the statement, the certification is a “key requirement” in the process of obtaining an operational licence for the plant.

Fanr said the first certified group comprises 15 reactor operators employed by Nawah Energy Company, the operations and maintenance subsidiary of the Emirates Nuclear Energy Corporation (Enec).

The group took part in a three-year training program, which included experience from some of the industry’s “leading engineering and nuclear energy experts”, a “discipline-focused curriculum”, and opportunities to train in South Korea, the US, South Africa, and the UAE.

Mark Reddemann, chief executive officer of Nawah, said the successful certification of the first operators’ group is “an important milestone” for the company in the development of its operational readiness programme, in advance of first fuel loading for Barakah-1.

Enec is building four South Korean 1,345-MW APR-1400 reactors at Barakah, about 240 km west of Abu Dhabi city in the UAE.

Enec said Unit 1 construction is complete and the plant has been turned over to operator Nawah for preparation to operate, pending regulatory approval.

The regulator Fanr said it is currently in the final stage of reviewing the operating licence application for the Barakah-1.

According to Enec, overall construction progress at the Barakah plant stands at 95%.

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