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Ukraine: EBRD Still Weighing Decision On Reactors

By Anthony Wesolowsky

Prague, 23 March 1999 (RFE/RL) -- As the European Bank for Reconstruction and Development (EBRD) moves slowly on a decision about whether to finance final construction of two nuclear power plants in Ukraine, critics continue to express doubts about the proposed loan and the project itself.

The EBRD is considering a loan valued at $190 million to complete two reactors in southern Ukraine, at Khmelnitsky and Rivne, known as K2/R4. Ukraine has vowed to shut down Chornobyl -- the site of the world's worst civilian nuclear accident in 1986 -- only if the two reactors are built to make up for the loss. The EBRD financing could unlock a further $500 million loan from the European Union-funded nuclear regulator, Euratom.

But environmentalists and other critics of the project worry the loan will create a precedent for spending sorely needed development money on other incomplete nuclear stations in former Eastern bloc states. The EBRD loan to Ukraine would be the first time an international development agency has funded the building of a nuclear station in a country.

Critics of the project seemed to gain support when the European Investment Bank (EIB) concluded earlier this year that Ukraine's problems in meeting electricity demand are mainly linked to fuel shortages in power stations due to non-payment for fuel and not to a lack of electricity-generating capacity. That was the same conclusion reached by a 1997 study by England's Sussex University commissioned by the EBRD.

But the EBRD coordinator for the K2/R4 project, William Franks, downplayed the findings in a recent interview with RFE/RL. He said there are solid economic grounds for backing construction of the reactors:

"K2 and R4 are the least-cost options in Ukraine because the existing capacity is old and inefficient and the fuel costs of that capacity are relatively higher than the fuel costs of K2/R4."

Besides the critical EIB report, more news continues to leak out that Ukraine had once proposed building a gas-fired power plant to replace Chornobyl, instead of the Soviet-type nuclear reactors at K2/R4.

Britain's Guardian newspaper recently published excerpts from a May 11, 1998, letter from Ukrainian President Leonid Kuchma to British Prime Minister Tony Blair. Blair was then serving as chairman of the G-7 group of states. In the letter, Kuchma reportedly asked Blair for help in securing promised G-7 aid to fund K2/R4. Kuchma said Ukraine had opted to complete K2/R4 instead of the gas-fired plants due to G-7 insistence.

Moreover, in a letter to The Economist magazine published in April 1996, Ukraine's then environment minister, Yuri Kostenko, blamed the EBRD for strong-arming Ukraine into completing the two reactors instead of a gas-powered plant.

Franks declined to comment on those points, noting he had worked for the bank only since September of last year.

But Franks indicated that the timing of an EBRD decision may be slipping. Last month -- in an interview with RFE/RL -- he said a decision by the EBRD board on the K2/R4 loan could be made in the first quarter of this year. Now, it appears a final decision will take longer:

"At the moment, we are working on actually preparing the decision paper, and we are working on a financing plan for the project. And I would expect that a decision would be made ... possibly in the first half [of this year]. But on the other hand, there are many decisions that are in the hands of the Ukrainians."

Franks said the delay in deciding whether to award the loan has nothing to do with the EBRD's uncertainty on whether the loan makes sense. Rather, he said, it is attributable to the EBRD's methodical decision-making process, which he said is taking longer than expected.