Financial crisis hurts some E.Europe nuclear plans

By Anna Mudeva, SOFIA
September 1, 2009

Domestic political squabbles, funding woes and other hurdles threaten a number of nuclear power plant projects in central and southeast Europe but they will not derail the future of atomic energy in the region. Analysts say the global economic crisis has made banks reluctant to provide loans for nuclear plants, which cost around 3 billion euros ($4.30 billion) per 1,000 megawatt reactor, for a pay-off that takes decades. Equipment suppliers and engineering companies are also unwilling to give fixed price tags during volatile times, which makes planning and calculation of costs difficult. But projects will continue to attract investment in the longer term as many governments look to atomic power to meet carbon emission targets and ensure future energy supply in a region where demand is expected to soar in coming decades.

The gas row between Russia and Ukraine that left many consumers and businesses in eastern Europe without power in the middle of last winter also underlined the importance of nuclear energy in boosting energy security for many countries. "A lot of projects in nuclear, in fossil fuels, in wind and in solar have been reconsidered," said Stephan Werthschulte, managing partner with consultants Accenture. "But the energy consumption is still growing all over the world." "The CO2 problem will last way longer than the financial crisis. Renewables and nuclear will stay very strong on the agenda," Werthschulte said.

It's not all smooth sailing. Bulgaria's nuclear project is likely to be put on ice or abandoned as the government struggles to tame deepening recession as foreign funding dries out. Lithuania's plans have hit delays due to domestic squabbling about how to structure and finance the project while the new president, Dalia Grybauskaite, has questioned its viability. And Turkey's plan to build its first nuclear power plant hinges on the willingness of a Russian-led consortium to lower electricity prices from the future reactors.


But the benefits of nuclear power, ranging from providing a stable energy supply to helping achieve emissions targets, are too great to ignore, analysts say. The latest former communist country in the region to decide to go nuclear is Poland, which needs to replace ageing Soviet-era capacity to meet rising power demand. Many in Poland see nuclear energy as an option for a country that relies on coal for 95 percent of its power. Nuclear proponents say atomic power emits almost no carbon dioxide (CO2), the greenhouse gas blamed for global warming. "There seems to be clear support for building nuclear plants in Poland by 2020," said Arkadiusz Wicik of Fitch Ratings. Slovakia, the Czech Republic, Romania and Hungary are also pushing on with plans for new nuclear blocs or looking to extend the life of existing plants, though analysts see some delays due to financial woes.

One advantage for governments in former communist eastern Europe is -- unlike in western Europe -- nuclear power provokes little public opposition. In countries like Bulgaria, which was forced to shut down old Soviet-era reactors to win European Union membership, atomic power is a matter of national pride and a sensitive social issue because the closure has caused price hikes. As a result, the previous Socialist-led government decided in favour of a new 2,000 MW nuclear plant in Belene on the Danube. It contracted Russia's Atomstroyexport to build it and picked German RWE for a 49-percent stake in the plant. But soaring costs and lack of funding prompted a rethink by the new centre-right government that took over in July. So far only the Russian government has offered a loan. But the new cabinet in Sofia says accepting it would increase even more the Balkan country's heavy energy dependence on Moscow.

Some experts say Belene is an example of a poorly structured project with weak economic logic. "The options are to postpone it until market conditions improve or just ditch it," said Kenneth Lefkowitz partner at Sofia-based New Europe Corporate Advisory. Others projects in nearby countries could fill that void, with some nations potentially banding together to develop joint nuclear strategies, analysts say. Romania's plan to add two new reactors to its Cernavoda plant may fare better because it is backed by several foreign investors -- as opposed to one in Belene's case, analysts said. Atomic power is also viable option for Turkey where consumption is growing rapidly, despite a row over prices offered by the sole bidder in the project, analysts say. "There might be a more intelligent way of cross-border solutions...At the moment a lot of countries are playing the national card," Accenture's Werthschulte said.


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