UPDATE 1-Czech PM outlines nuclear expansion with state control over construction

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PRAGUE, Feb 21 (Reuters) - Czech Prime Minister Andrej Babis on Thursday outlined the government’s plan to build a number of nuclear reactors, saying the state should control construction so it can halt the expansion should power prices fail to support the project.

The government expects to sign a contract with majority state-owned CEZ to build one or more new reactors at Dukovany, with a tender towards the end of 2020 and a supplier chosen by 2024.

Babis said the government would not provide CEZ an unlimited state guarantee and that the utility would cover any extra costs not generated by the state or foreign regulators.

“The basic aim of the state should be to take control of construction of new nuclear capacity,” Babis told a nuclear conference. “The state would get such control by signing a contract with CEZ on construction.”

“It is simpler and more favourable for customers than state guarantees, which would in fact amount to a blank cheque.”

The government has been considering how to fund a multi-billion-dollar expansion of CEZ’s nuclear power plants, before some units reach the end of their lifetime.

CEZ has balked at starting a tender without receiving state guarantees but Babis has said the company, Central Europe’s largest listed utility, can handle the project itself.

“It is necessary to start the first stage immediately ... to get building permission at the Dukovany site and to organise the tender,” Babis said.

“The state ... will have an option to make appropriate decisions on whether to continue or stop the planned construction in case the resulting consumer electricity price is at an unacceptable level.”

Some minority shareholders fear nuclear expansion through reactor construction would dent dividend payouts if CEZ were pushed to finance it on its own. The company could face shareholder lawsuits.

But CEZ Chief Executive Daniel Benes told the conference the best model for the expansion had not yet been determined and that any plan must not harm minority investors.

“The contract has to be construed in a way not to harm the minority shareholders,” he said.

In 2014, CEZ scrapped a previous plan to expand nuclear capacity after failing to receive state guarantees on power prices.

This time, firms from countries including Russia, China and the United States are set to vie for the project, which marks the country’s largest-ever tender.

The six potential bidders are China’s CGN, Atmea - a joint venture between Mitsubishi Heavy Industries and EDF Group - Westinghouse, South Korea’s KEPCO, French state-owned Areva and Russia’s Rosatom. (Reporting by Robert Mueller; Writing by Michael Kahn; Editing by Dale Hudson and Jason Neely)