* Bids due for two reactors worth over $10 billion
* U.S., Russian, French firms in the running
* Economic crisis, cloudy energy sector outlook are
* Deal likely to need government guarantees
By Jan Lopatka
PRAGUE, June 29 As several European countries
retreat from nuclear power, the Czech Republic is taking a big
step forward in a tender to build new reactors which some in the
industry see as a pivotal test of the technology's future on the
On Monday three U.S., French and Russian firms will file
bids to build two units at the Temelin plant, testing the waters
in central and western Europe after the economic crisis and a
disaster at Japan's Fukushima plant which stirred safety fears.
The plan, managed by national electricity company CEZ
, also has reverberations for energy security in a
country that takes most of its oil and gas from Russia.
The government hopes the project will help kick-start an
economy suffering from poor domestic demand amid the economic
crisis, yet high costs pose a risk that the plan may be
"This is the heart of Europe so it is not only a Czech
decision, it is sort of a reflection of what Europe thinks about
nuclear after Fukushima," Alexey Kalinin, general director of
Rosatom Overseas, told Reuters.
Temelin marks one of biggest tenders in Europe's energy
sector and the biggest-ever deal in the Czech Republic, worth
something over $10 billion, and possibly much more judging by a
history of delays and cost overruns.
Rosatom's Atomstroyexport and Toshiba U.S. unit
Westinghouse are angling to build the 2,200-3,200 megawatt plant
that could serve as a reference in Europe for their new designs,
MIR-1200 and AP1000.
France's Areva is already building new-generation
EPR reactors in France and Finland.
"It is important that we begin the next wave of reactors in
Europe as soon as possible. (Temelin) would certainly give
European customers more confidence," said Westinghouse Regional
Vice-President for Customer Relations and Sales Mike Kirst.
CEZ, a 70-percent state-owned company worth $19 billion,
needs to replace some of its coal plants heavy on carbon
emissions as they face likely closure after 2020.
"Developing nuclear energy is part of our long-term
strategy," strategy director Pavel Cyrani told reporters.
The tender winner is to be picked next year, and the new
units should be completed by 2025.
CRISIS WEAKENS ENERGY SECTOR
The global economic crisis has slashed demand for
electricity and weakened the balance sheets of utilities,
reducing their ability to finance expensive nuclear projects.
At the same time, a boom in U.S. shale gas extraction using
a method called fracking has also helped push down conventional
German wholesale electricity prices have dropped from their
2008 peak at over 90 euros per megawatt hour for baseload power
to less than 50.
The cost of permits to emit carbon dioxide has also crashed,
removing some of the advantage nuclear power has over fossil
"There are great risks. Opposition from Austria, Germany
...and no way to predict prices of baseload power," said Jiri
Gavor, partner at energy consultancy ENA.
This has led CEZ to enter discussions with the government on
guarantees for minimum prices for power from the new plant,
possibly along a model discuss in the UK.
CEZ is also searching for potential financial partners for
Industry and Trade Minister Martin Kuba said in March that a
"strategic decision" on a nuclear power plant had to carry other
than purely commercial aspects.
Gavor put it more simply: "The chance Temelin will be built
is about 50-50 with state guarantees...without them, it is about
Plant costs are hard to predict. Areva's Finland project, a
1,600-megawatt EPR reactor, has seen large overruns and delays.
The Nuclear Energy Agency (NEA), an agency within the
Organisation for Economic Co-operation and Development (OECD),
estimated in 2010 the cost of a Czech nuclear power plant at
$5,858 per kilowatt.
That would put Temelin's price tag at some $13-19 billion
for two units, without financing costs.
Austria is a long-time opponent of nuclear power which
shares a border with the Czechs just 50 km south of Temelin
where two 1,000 megawatt reactors already run. It fiercely
opposes the plan.
"No one can give us an absolute guarantee of nuclear power
safety. That has been shown by Chernobyl and Fukushima. An
atomic cloud does not respect borders," Environment Minister
Nikolaus Berlakovich said at a Temelin hearing last week.
He said Austrian citizens, who staged a string of border
blockades when the first Temelin units were built over a decade
ago, have filed 23,000 comments on the plan.
Experts fear Germany may also put pressure on the Czechs
after they themselves decided to give up on atomic power.
German utilities E.ON and RWE put their
6,000 megawatt Horizon nuclear project in the United Kingdom up
for sale. Italy has also ended nuclear power plans.
The Czechs, however, stand by their government on nuclear
power. Support has dropped after Fukushima, but in a poll last
week 62 percent of Czechs were still in favour of developing
nuclear energy versus just 25 percent opposed.
In fact, a number of countries in eastern Europe are still
forging ahead with nuclear plans. Lithuania is planning to build
a 1,300-megawatt plant. Plans in Bulgaria, Romania and Poland
have faced delays.
Czech industry has been lobbying hard for the project.
"There should be a 70 percent share of local sourcing,"
Stanislav Kazecky, the deputy chief of the Confederation of
Industry, told Reuters. "It has key importance for the power
engineering industry, and also for the construction business."
Russian firms, which supplied the country's six operating
reactors, although the last two with Westinghouse upgrades, may
have some advantage in local sourcing, Czech analysts have said,
although the other bidders dispute this.
Conversely, some see a Russian winner raising concern in a
country that takes most of its gas and oil from Russia, its
former Communist master that in the past has halted gas and oil
Kazecky dismisses that kind of danger. "This is not like oil
and gas. You can swap fuel suppliers, and store fuel for years."
(Additional reporting by Alissa de Carbonnel in Moscow; editing
by Jason Neely)