The Loan Guarantee with the US Export Import Bank
On 10 March 1994, the U.S. Ex-Im Bank agreed to provide a $317 million loan guarantee for the construction of the Czech nuclear power plant at Temelin. The loan is taken by CEZ (Czech electricity utility) from commercial lenders and is to cover Westinghouse supplies of: a) instrumentation and control (I&C) equipment and services, b) the initial nuclear fuel.
The total contract is for $419 million, with a U.S. export value of $334 million (the rest is provided by Westinghouse Belgium). Specifically, the I&C contract has U.S. costs 243.1 million, Belgian costs $61.5 million and local costs $23.9 million. The fuel contract has U.S. costs of $90.5 million. Ex-Im Bank guarantees, including fees, total $317 million ($238.9 million for I&C plus $78.5 million for fuel).
The Temelin project has always been controversial. Thus, the Ex-Im decision was based on many promises made to the U.S. Congress. Today, after almost 3 years, the project suffers serious cost overruns and delays; it has basically gone out of control. Many of the technical and political promises have not been met. Recently, there has been a scandal in the Czech Republic around possible bribery between CEZ and Westinghouse officials linked with their contracts. The $317 million is thus threatened.
In the light of the mentioned facts, we suggest that you commission an investigation of the Temelin project. There is still time to withdraw U.S. money (which has not yet been transfered to CEZ) from it.
Time Schedule of Temelin's Construction
In 1993, when the Czech government gave the project a green light, it was clearly stated that Temelin would be finished by the end of 1995 (first reactor) and middle of 1997 (second reactor), at a total cost of 68.8 billion CZK ($2.5 billion).
In 1994, while Czech government still confirmed the original deadline, Ex-Im wrote in its letter to Speaker of the House (January 27th, 1994) that commercial startup of the reactors was expected to happen on July 15th 1997 and October 15th 1998, respectively. This was also the time schedule based upon which Ex-Im approved its loan guarantees and calculated risks linked with them.
Since then, even Czech domestic sources have admitted several serious delays. Now, in Autumn 1996, the deadline for finishing the first Temelin reactor is the beginning of 1999. This means a delay of 3 years compared to the Czech governmental decision from 1993, and a delay of 1.5 years compared to Ex-Im promises.
Even worse, a high-positioned source within the Czech Ministry of Economy said that his office already now has studies suggesting that the first reactor will not be finished before 2000. If this happens, the overall delay will exceed 4 years.
The official explanations given by the Ministry of Economy and CEZ are worrisome, and show that recent figures are still not necessarily final. According to them, the reasons for the delays are unclarified responsibilities among suppliersm, and underestimated scope of necessary modifications, forcing unexpected necessary changes in the parts of the power plant which have already been completed (such as the need to replace several kilometers of cables with new ones, in concrete shafts so tiny that only one worker can do this job at one time).
There is a sad joke circulating among the Czech public, saying that since 1988, the start-up of Temelin is still two years away. Unfortunately, this joke has been made true for already 8 years.
In 1993, when the Czech government gave the project a green light, it clearly stated that Temelin would be finished by the end of 1995 (first reactor) and mid-1997 (second reactor), both at a cost of 68.8 billion CZK ($ 2.5 billion).
Since
then, the price has been raised several times, together with postponement
of the construction deadlines. With the same explanations, the total price
has risen by 10 billion CZK ($360 million), about the same amount as is
guaranteed by Ex-Im Bank. If the Czechs did not have this money in 1994
and had to borrow it, how will they be able to cover a cost increase of
the same magnitude?
Again, senior sources within Ministery of Economy claim that the internal studies which indicate a 4 year delay in project completion also estimate that the final price of the project at 100 billion CZK ($ 3.6 billion) - $ 1.1 billion more than was planned in 1993.
Broken Promises about Openness to Public
In its letter to Congressman Kennedy dated March 7, 1994, ExIm said: "As to the specific matter of public participation and access to documents, according to the Czechs, documents relating to environmental aspects of the plant are already available to the public."
We have to say that based on this Ex-Im's claim, Friends of the Earth has been requesting exactly the same documents that are listed in the attachment, but to no avail. All the responsible offices and bodies replied to our demands that they do not have these documents.
It is especially disturbing that the mentioned studies, mostly about the power plant's environmental impact, are in practice not accessible to the public. Other very important documents like the safety analysis and the documentation of modifications to the original project, which are plainly witheld from public.
Scandal around Contracts between CEZ and Westinghouse
In May 1996, the Czech media started to discover a serious scandal around three major contracts between CEZ and Westinghouse - a contract to supply a unique information system to all power plants owned by CEZ, and the two Temelin contracts - for I&C System and nuclear fuel.
What became clear was that a Westinghouse's consultant - Jan Vadlejch - was influencing the decisions inside the CEZ board of directors during the biddings for these strategic contracts.
Best documented is the first case concerning the unique information system. Allegedly, after Westinghouse won only the 3rd position in the bidding, Vadlejch arranged, by bribing some CEZ directors, to arrange a second round of bidding, where competitors got an opportunity to modify their prices. At the same time, information about other prices was leaked to Westinghouse, who then cut its price by almost 50 % in order to submit the cheapest bid. As a result, the contract was finally signed with Westinghouse.
It is worth mentioning that after managing to get the contract, Westinghouse was not able to fulfill its commitments - its supplies already are delayed by several months now.
This case is now being investigated by criminal police, and several pieces of evidence have been published - like the letter from Vadlejch to one CEZ director, that contains strategy suggestions (to announce the second round of bidding) and a promise of "fulfilling our commitments" as a return for this service.
Consequently, two other contracts - the ones for Temelin nuclear power plant - are under scrutiny. In these cases as well, evidence of bid tampering has been uncovered.
The scandal around Westinghouse's contracts has been inquired into and closely followed by the formost Czech newspaper MF DNES (Today). So far, it published over 20 major articles on this issue, many of them on its front page.
Translation of Article Revealing the Scandal around Westinghouse's Contract
Temelin Nuclear Power Plant
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Temelin nuclear power plant is based on old Soviet-design reactors (VVER-1000); its construction started in 1984. After the political changes, it was decided that the project would be upgraded to a certain extent by Westinghouse Corp. According to the original Communist plan, agreed upon by the Czech government, the plant's first reactor was to be finished by the end of 1990 and the budget was 35 billion CZK ($1.2 billion). The new, democratic government decided in 1993 to go on with the construction of two reactors, stating the new deadline for the first reactor was the end of 1995 and budget as 68.8 billion Czech Crowns ($2.5 billion).
Numerous independent studies have proven that the construction of a new 2,000 MW power plant was unnecessary. Among the authors of these studies, one can find such respected institutions as the World Bank, the European Bank for Reconstruction and Development, and Tractebel. There are also other independent studies, like that of Power International, that stress the fact that the Temelin project is not least-cost, because many linked costs have been ignored. As a conclusion, these studies suggest that other solutions to the electricity market in Czech Republic be implemented, which include potentials energy savings (1,200 to 5,000 MW), combined heat and electricity generation (1,500 to 6,000 MW), energy from independent producers (3,300-3,900 MW), and renewables (wind 300-600 MW, small scale water 400-800 MW, biomass 500-1,000 MW). Importantly, the Tractebel "least cost study" was used to justify the Temelin project, but even this study showed that energy efficiency was more cost effective than Temelin, but the authors were not permitted to use demand side solutions in their recommendations.
The Temelin project, even with Westinghouse's safety upgrades, could never be licensed according to the current safety standards valid in Western countries. There are many technical weak points than can never be upgraded at a reasonable cost, like insufficient containment, a small reactor vessel leading to early embrittlement and other serious defects. In 1992, an independent audit by Halliburton NUS discovered many problems on the site: poor organization; a weak quality control programme; improper and lacking documentation. Although these mistakes were supposed to be corrected promptly, as late as 1994 the SUJB (the Czech version of the NRC - Nuclear Regulatory Committee) lists the same problems.
There is a serious problem of failed democratic process at Temelin. The project is being built despite a request by the majority (58 of 65) villages in the region demanded that it be stopped. Petitions signed by over 60,000 people have neven been commented on by the Czech government. The construction license is based on an old Soviet design, now modified to a large extent. There has never been a new licensing process for these modifications; the legality of the whole project is thus brought into question. And there has never been a public discussion about the environmental impact of the plant (EIA), that should be, according to current Czech laws, initiated as a result of the serious project modifications.
And last but not least, the public has been allowed basically no access to documentation linked with the project, from safety analyses to even studies of its environmental impact.
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