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Czech government takes step toward building new nuclear plant

FILE PHOTO: Czech electricity producer CEZ's logo is seen next to an electricity pylon in front of the Ledvice coal-fired power plant near the village of Ledvice, Czech Republic, February 9, 2016. REUTERS/David W Cerny

PRAGUE (Reuters) - The Czech government on Monday approved agreements with majority state-owned electricity producer CEZ setting out the framework for building a new nuclear power block to come online by 2036, Industry Minister Karel Havlicek said.

The Czech state has long been in talks with CEZ, in which it owns a 70% stake, about expanding its nuclear power fleet to replace blocks that will expire in the coming decades. However, the question of financing has been a major sticking point.

Havlicek said he and Finance Minister Alena Schillerova would propose the financing model by the end of May, before the state goes into talks with the European Commission.

The two contracts approved by the Cabinet, which Havlicek wants to close with CEZ by the end of June, allow CEZ to sell the project to the state at various points in the project’s timeline.

A third contract still to be prepared would lay out conditions under which the state could buy electricity from CEZ.

Havlicek said the price would be determined according to “justified costs and reasonable profit”.

The government has estimated a new 1,200 MW block, set to be built at CEZ’s Dukovany nuclear power plant and enough to cover a tenth of annual consumption, would cost 140 billion to 160 billion crowns (5.12 billion pounds).

Critics, including some CEZ minority shareholders, argue costs will run much higher.

CEZ had cancelled a 2014 tender to expand its 2,000 MW Temelin nuclear power station after failing to agree with a previous government on state guarantees for electricity prices to safeguard its investment, which will be the country’s biggest energy investment in its three-decade post-communist history.

Reporting by Jan Lopatka and Robert Muller; editing by Jonathan Oatis