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U.S.-Russian Contest To Secure Czech Nuclear Contract Heats Up

Inside The Temelin Nuclear Power Plant
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WATCH: Inside the Temelin nuclear power plant

PRAGUE -- If Cold War battles are still being fought in Europe, one major battlefield today is the Czech Republic’s Temelin nuclear power station.

Consortiums backed by Washington and Moscow are vying fiercely for a contract worth some $10 billion to build two additional reactors for the plant in a showdown that is as much about geopolitics as it is about energy.

The Czechs are due to announce the winning bid in September.

But a preliminary evaluation issued this week by CEZ, Temelin's majority state-owned operator, indicates that the American-Japanese Westinghouse bid may have pulled ahead in the race.

Although CEZ did not make its findings public, Czech media are reporting that the Westinghouse bid was judged better on technical and licensing criteria -- seen as crucial categories. The bid by the Russian-backed consortium MIR.1200 reportedly came out ahead on price.

Speaking at a news conference on March 25, Westinghouse CEO Danny Roderick said his side now saw itself as "no. 1" in the race. The Russian side said, for its part, that it considered the CEZ evaluation to be "preliminary."

CEZ has said it will now negotiate with both competitors about the possibility of improving their bids, leaving the field open for more months of jockeying before the final decision is reached.

According to Jan Hornat, a political analyst at Prague’s Charles University, both bidders are openly backed by their governments and waging a public relations battle in the Czech Republic. The feuding has included Washington suggesting Moscow is engaged in backroom dealing.

“The U.S. Embassy [in Prague] has said that they want to make all statements about the Temelin bid public, that they don't want to negotiate behind closed doors,” Hornat says. “And this implies that what the Russians are doing is negotiating somehow behind closed doors and not making all their political pronouncements public.”

National Security

Washington casts the choice as a question of national security for the Czech Republic. When former Secretary of State Hillary Clinton visited Prague in December 2012, she emphasized the country’s already heavy dependence on energy exports from the Russian Federation. The implication was that too much dependence creates a security risk.

Some 70 percent of the Czech Republic’s natural gas, over 60 percent of its oil, and all of its nuclear fuel come from Russia. Other countries, notably Ukraine and Georgia, which are heavily tied to Russian energy, have seen themselves pressured by energy cutbacks or cutoffs in spats with Moscow, suggesting that the Kremlin views energy exports as an extended arm of its foreign policy.

But if Washington is playing the security card to sway Prague, Moscow is playing an economic one. It has cast the Russian-Czech consortium – composed of Czech Skoda JS and Russia’s state controlled Atomstroyexport and Gidropress -- as the most reliable partner should CEZ runs out of funds to finance the project. Both Russian firms in the consortium are owned by Rosatom, the Russian government’s nuclear giant. And it has promised to subcontract much of the work to local firms, providing an employment boost.

Rosatom is reported to regard Temelin as crucial for its hopes of winning future contracts to construct new power stations in Hungary and Poland and of maintaining its position as the world’s leader when it comes to constructing nuclear plants in other countries.

Washington has not indicated what it might do if the Temelin project runs out of funds, despite speculation that such aid could be provided by the American Export-Import Bank.

A third contestant in the race – France’s Areva – was disqualified in October for failing to meet legislative and commercial requirements. It has appealed the decision.

Wavering Public Opinion

Perhaps the most unpredictable player is the Czech government, the 70 percent shareholder in CEZ which has the final say over who gets the Temelin expansion contract.

Although the newly elected Czech President Milos Zeman has no formal role in the decision-making process, many believe he could have some say in the final outcome.

According to Jan Machacek, of the Czech investigative magazine "Respekt," Zeman has given no hints of whom he favors. And his own record of having strong links to Moscow while also adopting a pro-EU stance offers few clues.

"There are signals that Mr. Zeman is connected to some Russian interests but ideologically he definitely doesn't proclaim himself to be anti-Western or anti-European Union. On the other hand, it is well known that one of the bosses of the Czech subsidiary of the Russian oil firm LUKoil was the head of Mr. Zeman's campaign."

Yet Machacek maintains that there is a still bigger unknown: whether Czech public opinion might eventually decide the Temelin upgrade project is unfeasible.

"The main question is whether it is really necessary to go for this investment because more and more analysts are saying that we actually don't need this extra capacity,” he says. “More and more people believe that it is more rational not to go for Temelin, though Zeman, like [former President Vaclav] Klaus has supported Temelin."

Jan Rovensky, chief energy campaigner for Greenpeace in the Czech Republic points out that the country is already the third biggest electricity exporter in Europe.

"We export more electricity than the total consumption of all Czech households,” he says. “So, generally, building huge new nuclear power plants or coal power plants definitely makes no sense because these new power plants would increase the export but it has nothing to do with national energy security."

Rovensky says some 70 percent of Czechs are in favor of nuclear energy. But he says only around 50 percent support Temelin because of fears that the costly project could only be funded by raising Czech consumers’ electricity prices.

Analysts have warned that CEZ would not be able to obtain funding for the project unless the Czech government guarantees a purchase price of electricity higher than a benchmark price of 50 euros per megawatt hour. So far, the government has hesitated to give such guarantees, partly for fear of riling the public, which currently pay some 10 euros per megawatt hour or less.

The Temelin upgrade is intended to double the electric output capacity of the nuclear plant by doubling reactor units to four. The Czech government calls it key to its plans to use nuclear fuel to move away from coal plants and decrease its dependency on imported natural gas.

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