Czech govt mulls price floors to lure new nuclear

Tuesday, April 10, 2012

TEMELIN, Czech Republic, March 30 (Reuters) - The Czech government sees building new nuclear power plants as a strategic priority and is considering minimum electricity price guarantees to ensure new reactors are built, the country's industry minister said on Friday.

In contrast to countries such as neighbouring Germany that are pulling out of nuclear energy in light of the disaster at Japan's Fukushima a year ago, the Czech Republic aims to enlarge the existing Temelin site in the south of the country.

The 70-percent state owned power producer CEZ, the biggest listed central European company with market capitalisation of $23 billion, has opened a tender to build two new units.

But doubts have been hanging over the financial viability of the plan due to uncertain energy market in Europe.

Minister Martin Kuba, in the clearest remarks so far on the subject, told Reuters the government was willing to discuss setting minimum purchase prices for power from the new units, estimated to cost more than $10 billion.

"The government must say what sources it wants in its energy mix, what portfolio it wants," Kuba said during a visit to Temelin.

"That is a strategic decision which cannot be dictated only by economic conditions on the market this point for many energy firms it would be economically most favourable to build the supported (renewable) resources."

"I can imagine looking for some model -- and I believe we have an agreement on that -- which would create conditions for the energy from this (Temelin) investment to be reasonable in the long-term for the investor," Kuba told Reuters.

CEZ plans to build two new units at Temelin, in southern Czech Republic close to the border with Austria, with capacity of at least 1,000 megawatts each.

Last year's estimates of plant costs by the International Energy Agency, an inter-government energy security body, put the cost of new nuclear plants at $5,339 per megawatthour in overnight capital costs, which excludes the cost of financing.

Some analysts have suggested that CEZ has enough cash to build the reactors on its own, but would probably not go for the expansion without some kind of state guarantee for future electricity prices.

CEZ Chief Financial Officer Martin Novak said earlier this week that CEZ had sufficient financial strength to go ahead with the project even without a guarantee but was still interested in talks on receiving one.

Kuba said he would favour aid to nuclear rather than renewable energy.

"We are now supporting, with 32 billion crowns a year, installations that make a minimal contribution to the power system," Kuba said, referring to the generous subsidies to photovoltaic plants over the past years.

"If you asked me whether it is wise to support nuclear energy against photovoltaic plants, than as an industry minister I have to say yes."

Three qualified bidders - Toshiba Corp unit Westinghouse, France's Areva and Russia's Atomstroyexport - are due to submit their proposals in July.

The possible reactors on offer are Westinghouse's AP1000, already being built in China, Areva's EPR, which is being built in Finland, France and China, and the Russian VVER reactor whose six older versions CEZ already operates.

Kuba's remarks come a day after German utilities E.ON and RWE pulled out of a 15 billion pound ($24 billion) plan to build new nuclear stations in Britain.

The pullout was a fresh blow to revival of the nuclear industry in Europe, badly hurt by Fukushima and by current high uncertainty over the future costs of permits to emit carbon dioxide.

Prices of permits, needed by high-polluting but otherwise low-cost coal plants but not by atomic ones, have collapsed in the past years, making nuclear power less attractive.

Long-term power prices, meanwhile, have also fallen, on concerns over future energy demand in a weak European economy.

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