OVERVIEW OF CZECH NUCLEAR PROGRAM

UNCLAS SECTION 01 OF 02 PRAGUE 000789

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SIPDIS

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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

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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