DRY-STORAGE CASKS: TAIWAN POWER WILL COMPLY WITH

UNCLAS SECTION 01 OF 02 TAIPEI 002703

SIPDIS

SENSITIVE

STATE PASS AIT/W
STATE FOR EAP/RSP/TC, AND NP/NE - BURKHART, STATE PLEASE
PASS AIT/W AND USTR - WINELAND, USDOC FOR 3132 ITA/CS/DRD
EAP JHAMILTON, 3005/ITA/CS/ADVOCACY CENTER BLOPP AGELFUSO,
AND FOR 440 ITIA/MAC/OP/M-BMORGAN

E.O. 12958: N/A
TAGS: KSCA TRGY ENRG BEXP TW
SUBJECT: DRY-STORAGE CASKS: TAIWAN POWER WILL COMPLY WITH
REGULATIONS

REF: A. TAIPEI 2669


B. TAIPEI 2474

C. SECSTATE 99089

D. TAIPEI 2250

E. TAIPEI 2601


1. (SBU) SUMMARY: On June 17, AIT/T met with Edward K. Chen,
Acting Chairman and President of Taipower, to deliver reftel
talking points regarding nuclear safety issues and Taiwan's
tender for dry-storage casks. In addition to the nuclear
safety issues, AIT/T emphasized Washington agencies' concerns
regarding the potential conflict of interest in the
procurement process as well as the lack of transparency in
the process. Chen said that he shares the US view that
safety is of the utmost concern and he believes that Taiwan's
Atomic Energy Commission also shares this view. He said that
the ceiling price set by Taipower is reasonable and based on
market surveys while the prices that have been offered have
been much higher than expected. Chen said that Taipower
needs to quickly move forward to secure storage facilities
because of the shortage of storage space remaining at the
Chinshan nuclear power plant. END SUMMARY.


2. (SBU) On June 17, AIT/T Economic and Commercial Chiefs
met with Edward K. Chen, Acting Chairman and President of
Taipower, to deliver reftel talking points regarding nuclear
safety issues and Taiwan's tender for dry-storage casks for
low-level nuclear waste. In addition to the nuclear safety
issues, AIT/T emphasized Washington agencies' concerns
regarding the potential conflict of interest in having the
Institute of Nuclear Energy Research (INER) enter into a
sole-source contract with Taipower to provide the casks, when
INER is controlled by Taiwan's nuclear regulator, the Atomic
Energy Commission (AEC). AIT/T briefly reviewed the
procurement history of two current tenders by Taipower: the
dry-storage casks and a separate one on control-rod reduction
services. AIT/T Commercial Chief had discussed these tenders
in a previous meeting with Chen.

Safety is of Utmost Concern
--------------

3. (SBU) Chen said that he shares the US view that safety is
of the utmost concern. He said that he believes that the AEC
also shares this view. Chen said Taipower's only objective
is to secure safe, long-term storage for the spent fuel at
Chinshan nuclear power plant. He said Taipower needs to take
action soon to prepare for when the Chinshan on-site storage
capacity is reached. He remains convinced that the best way
to accommodate Chinshan's storage requirements is to proceed
with the current approach to have INER supply the dry-storage
technology. Chen added that dry storage is a passive
activity and a relatively low risk solution.

Tender Price Unreasonably High
--------------

4. (SBU) Chen noted that there are at least one or two US
firms interested in the cask tender and that one of them is
aggressive and greedy. He said that the price quoted by the
firm is much higher than expected and well above the ceiling
price, which was based on a market survey. He said that
Taipower believes the ceiling price established in the tender
is very reasonable. Chen said, "taking Holtec as an
example," Taipower can never accept the high price being
proposed. AIT/T responded that we are not advocating on
behalf of any one company. Rather, we said AIT/T is focussed
on the nuclear safety issue of the proposed project and
therefore is in favor of using proven technology rather than
a new approach. We also noted US concerns over the
procurement process in this case, noting our view that the
project should be transparent. Chen said Taipower will use
proven US technology and strictly follow US Nuclear
Regulatory Commission licensing procedures as implemented by
Taiwan's AEC. Chen said that Taipower will comply with
Taiwan's procurement law in all respects and that any
tenders, including by INER, will be done through a public,
open bid process. Finally, he claimed that under the terms
of Taiwan's government procurement law, officials cannot
announce the companies that have bid on a project.


5. (SBU) Comment: Taipower's primary focus seems to be the
timeline for completing the Chinshan dry-storage project.
Chen believes that Taipower cannot afford the time that would
be required to rebid the entire project. AIT/T has now
presented ref C points to all of the relevant players in the
dry-storage project. The AEC, INER and Taipower have all
affirmed that safety is their primary concern and that they
will all comply with US NRC licensing requirements and
Taiwan's Government Procurement Law in this project. End
Comment.
PAAL