A key loan to Ukraine -- part of a $1.5 billion package linked to the closure of the Chornobyl nuclear power plant -- has moved closer to final approval. The board of the European Bank for Reconstruction and Development is to vote next month to confirm the $215 million loan. Approval by the EBRD board also would help unlock funds from other lenders for the completion of reactors at the Khmelnitsky-2 and Rivne-4 nuclear plants.
Prague, 8 November 2001 (RFE/RL) -- Jean Lemierre, the president of the European Bank for Reconstruction and Development (EBRD), says Ukraine has met the four conditions attached to a loan to help complete reactors at the Khmelnitsky-2 and Rivne-4 nuclear power plants -- known collectively as K2R4.
The $215 million loan was tentatively approved a year ago on the condition that Ukraine meet the four targets on nuclear safety and economic credibility. Lemierre formally recommended in London yesterday that the EBRD's board of directors confirm the loan.
The EBRD's role as an administrator of nuclear safety accounts and decommissioning funds means that confirmation by the board next month also will help unlock other promised financing so that Ukraine can replace energy production lost by the closure of the Chornobyl nuclear power plant last year.
Altogether, some $1.5 billion has been pledged for upgrading and completing the Soviet-designed reactors at the Khmelnitsky and Rivne power plants.
The first condition for EBRD financing was met a year ago when authorities in Ukraine permanently shut down the last active nuclear reactor at Chornobyl -- the site, in 1986, of the world's worst civilian nuclear accident.
Another important step was reached in September when the International Monetary Fund resumed disbursements under a loan program known as the "Extended Fund Facility."
EBRD spokesman Jeff Hiday told RFE/RL today that Lemierre's approval of Kyiv's progress on nuclear safety assurances is significant: "Another [important condition that Lemierre says has been met] is that a host of [nuclear] safety standards are put in place. And not only safety standards, but money to implement safety standards. And this is not only for these two reactors [at Khmelnitsky and Rivne], but also for all 13 nuclear reactors that are operated in Ukraine."
The safety assurances required by the EBRD include the issuing of a report by international nuclear regulators confirming that Ukrainian nuclear regulators have the necessary independence and resources to assure that nuclear plants in the country meet Western safety standards. The EBRD also required commitments from the Group of Seven (G-7) leading industrial nations and from the European Commission to provide technical assistance.
Finally, financial commitments for the K2R4 project were required from the European Union's nuclear agency, Euroatom, along with several export credit agencies and Russia.
Hiday says prompt confirmation by the EBRD board next month could allow financing for the remainder of the $1.5 billion loan package to be completed by the end of this year.
"I think [the EBRD loan and financing from other sources] is going to come together more or less simultaneously. The G-7 also has to take a lead in arranging the financing. But it all needs to happen more or less at once. And in fact, if we sign this deal next month in Kyiv -- as we hope to -- it would be not only us signing the deal but several of the other parties signing the deal at the same time. So we all have to move in concert."
Hiday says the EBRD board's vote is not expected to be a long, drawn-out process: "[The board simply has] to give a confirmation that these four conditions have been met. But they don't have to go through the entire project again [as they did last year]. It's purely to agree that these technical conditions have been met."
Hiday said any loan agreement signed in Kyiv would contain a series of additional conditions that would have to be met before money is actually disbursed: "There are a lot of other conditions that relate to the money being disbursed. There are about 30 in total. They range from adoption of a privatization plan for [Ukrainian] energy-distribution companies to the establishment of a decommissioning fund for the eventual decommissioning of other [nuclear power] plants. Also, they have to do with electricity-sector reform, to get tariffs raised and more cash collected for electricity bills."
The G-7 countries and the European Commission signed a memorandum of understanding with Kyiv in 1995 on the closure of Chornobyl. The EBRD was asked at that time to play a role in possible financing for the completion of K2R4.
The EBRD also administers three international funds for the decommissioning of Soviet-designed nuclear reactors in Lithuania, Bulgaria, and Slovakia.