OVERVIEW OF CZECH NUCLEAR PROGRAM

UNCLAS SECTION 01 OF 02 PRAGUE 000789 SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ENRG TRGY BEXP BTIO EZ SUBJECT: OVERVIEW OF CZECH NUCLEAR PROGRAM REF: SECSTATE 127468 (U) This message is sensitive but unclassified. Please treat accordingly. ¶1. (SBU) Summary: The Czech nuclear industry sector offers significant opportunities for U.S. business, especially if a possible tender for the construction of two (possibly four) new reactors goes forward. Currently, the Czech Republic's two commercial nuclear power stations account for 30 percent of Czech electricity production (domestic coal accounts for 64 percent). The majority of ordinary Czechs and Czech political parties support expanding nuclear power as a way to meet the country's growing energy needs. The semi-state electricity company CEZ would like to build new units at its nuclear power plants in Temelin (and possibly Dukovany) and has initiated an environmental impact study. The Green Party, however. is using its position within the government to block (at least for the moment) any expansion of nuclear power within the country. Should a tender go forward, likely competitors include Westinghouse, Areva, Mitsubishi and Atomenergoprom. End Summary. ¶2. (U) The Czech Republic currently has two commercial nuclear power stations, both owned and operated by the semi-state electricity company CEZ (which is 60 percent government-owned). Dukovany which is located in southern Moravia, came on line in 1985. It consists of four VVER 440 pressurized water reactors. In 2007, it produced 13,907,143 MWh of electricity. Temelin, which is in southern Bohemia, started production in 2002. It was designed for four units, but currently consists of only two VVER 1000 pressurized water reactors. It produced 12,264,913 MWh in 2007. While the two nuclear power stations account for only 21 percent of the Czech Republic,s installed capacity, they account for 30 percent of Czech electricity generation (64 percent comes from coal). The Czech Republic also has two research reactors and mines about 300 tons of Uranium cake a year (after processing abroad, this uranium satisfies a significant portion of Dukovany's fuel needs). Currently, the Russian company TVEL supplies the nuclear fuel for Dukovany, while Westinghouse supplies Temelin. Starting in 2010, TVEL will supply both nuclear power stations with fuel. ¶3. (SBU) With the notable exception of the Green party, there is wide-spread consensus that the expansion of nuclear power is critical to meeting future Czech energy needs. The Green Party, which is a junior partner in the ruling government coalition, is the notable exception and strongly opposes expanding nuclear power. As a result, the coalition agreement includes a clause that prohibits the government from approving the construction of new nuclear reactors. ¶4. (SBU) Demand for electricity is steadily increasing, while several coal power plants are nearing the end of their production life. Environmental limits on coal mining and new EU emission trading requirements make coal-fired power plants less commercially attractive. While new natural gas-fired power plants are planned, many Czechs are reluctant to further increase the country's dependence on foreign suppliers (currently the Czech Republic gets 70 percent of its gas from Russia and 30 percent from Norway). As a result, polls consistently show strong public support for nuclear power, and most political parties support increasing nuclear production. ¶5. (SBU) CEZ continues to view expansion of nuclear power as an integral element in its long-term plans. A CEZ feasibility study showed that Temelin was the most promising site for future expansion, as it was originally planned for four units. Consequently, much of the infrastructure for two additional units already exists. In July 2008, CEZ initiated an environmental impact assessment with the Ministry of Environment on building an additional two units at Temelin. CEZ,s submission outlined several different possible reactor types and sizes. The assessment is expected to last approximately two years. CEZ has stated publicly that it would like to have the new units in operation by 2020. It may be difficult for CEZ to go forward with tenders for the construction of the units in the near term, given the Green Party,s opposition to expanding nuclear power and the state,s majority stake in CEZ. Should a tender be released, Westinghouse, Areva, Mitsubishi and Atomenergoprom are expected to be the main competitors. ¶6. (U) Any construction of new nuclear power stations or units is likely to involve CEZ. The state would be unlikely to provide any tax breaks or subsidies for new nuclear power stations. CEZ would most likely seek financing from PRAGUE 00000789 002 OF 002 international investment banks and consortia. ¶7. (U) The Czech Republic possesses a strong manufacturing and construction base. Several domestic firms are involved in the production of nuclear-related products and services. Consequently, the majority of components and services for any new plants/units could be supplied locally. Major Czech firms involved in nuclear products and services include CEZ, Skoda Power (a manufacturer of power turbines),Vitkovice (a manufacturer of boilers, and Skoda Nuclear Engineering (aka Skoda JS, a member of the Russian-owned OMZ group.) ¶8. (U) Similarly, the Czech Republic has a relatively strong nuclear and engineering workforce, many of whom have extensive experience with Russian civil nuclear technology. The Czech Technical University in Prague has a Faculty of Nuclear Sciences and Physical Engineering with a small nuclear reactor department with its own research reactor. Several universities offer strong engineering degrees. There is also a Nuclear Research Institute in Rez (of which CEZ is the majority-owner). We do not anticipate that expansion of civil nuclear power would require a significant foreign workforce. ¶9. (U) The State Office of Nuclear Safety (SONS) regulates the nuclear sector. It is a government agency and reports directly to the Prime Minister,s Office. It is independent of the Ministry of Industry and Trade, the main agency promoting nuclear power in the Czech Republic. It also independent of the Ministry of Finance which together with the Ministry of Industry and Trade controls the State,s 60 percent stake in CEZ (which operates the country,s two commercial reactors). SONS employs around 200 people. We are unaware of any plans to expand SONS's workforce in the near term, although this may change if plans to expand nuclear production go forward. ¶10. (U) The Czech Republic does not have a separate liability law. Liability issues are included, however, in Chapter Five (sections 32 to 38) of ACT No. 18/1997 (as amended) on Peaceful Utilization of Nuclear Energy and Ionising Radiation (the Atomic Act). This act is available in English at www.sujb.cz /docs/sujb CR-Atomic Act.pdf. The Czech Republic is a party to the Vienna Convention on Civil Liability for Nuclear Damage. Thompson-Jones