(13/12/00)

Western nuclear industry moves ahead with K2R4

A new wake-up call for all anti-nuclear campaigners and activists. Following news proves that we still do not do enough to stop the nuclear maffia doing dirty business.

Brussels, 13 December 2000

Chornobyl closure: Commission approves Euratom Loan for the completion of two replacement nuclear units in the Ukraine On behalf of Euratom, the European Commission today approved a loan to the Ukrainian National Nuclear Power Company Energoatom for the equivalent of USD 585 million. This loan is to part finance a project for the completion, modernisation and commissioning of unit 2 at Khmelnitsky and unit 4 at Rivne nuclear power plants in Ukraine, the so-called K2R4 project. The proj ect features in the Memorandum of Understanding signed in 1995 between the G7 countries and the European Commission and Ukraine on the permanent closure of the Chornobyl nuclear power plant, now scheduled for 15 December. It will provide Ukraine with replacement power from two nuclear units of the VVER 1000 type upgraded to a safety level acceptable under Western-type licensing practices. The European Bank for Reconstruction and Development has recently approved a loan of USD 215 million for the same project.

In 1995, the G7 countries and the European Commission signed a Memorandum of Understanding with Ukraine to elaborate and implement a comprehensive program to support the Ukrainian decision to close the Chernobyl nuclear power plant by the year 2000. An important element of this program was the preparation of loan-financed projects like K2R4 that would help Ukraine to meet future national power requirements based upon least-cost planning principles. The Commission and the EBRD have been preparing the groundwork for their respective loans for several years. The approval of the Euratom loan a few days before the permanent closure of Chornobyl gives a clear sign of the Commission's commitment to nuclear safety as outlined in its communication on nuclear safety in the NIS and Central and Eastern Europe(1), as well as to the deepening of relations with Ukraine under the EU's common strategy.

The K2R4 project will finance the completion (80% constructed), modernisation and commissioning of two third-generation nuclear units; unit 2 at Khemelnitsky (K2) and unit 4 at Rivne (R4) nuclear power plants. The construction will be sequential, with main works at R4 starting only after the implementation of the measures at K2 has been satisfactorily concluded. This is the most rational approach from an engineering point of view and increases the chances of success for the project. There will be a positive impact on the modernisation of the power sector and a strengthening of the nuclear Regulatory Authority. It will also show the way, technically and financially, for the safety upgrade of other nuclear units in the country where a modernisation program like that of K2R4 could be implemented.

Various studies have been carried out, many of them financed through Tacis grants, and opinions and recommendations have been given by the Phare/Tacis group of Experts from the Member States, the EIB and the Economic and Financial Committee. This has led the Commission and the EBRD to conclude that the project meets safety, environmental, economic and financial criteria. Independent evaluations of the measures to be implemented confirmed that the planned upgrading would raise safety to levels acceptable under Western-type licensing practices. Further, an Environmental Impact Assessment has resulted in an Environmental Action Plan that is being included in the project.

The approved Euratom loan for a EUR equivalent of USD 585 million and the EBRD loan of USD 215 million will be complemented with loans from Export Credit Agencies, Russia and local contributions. The total financing cost of the project is estimated at USD 1.48 billion. The State of Ukraine will guarantee the Euratom loan.

Western companies are heavily involved in the Project. The General Contractor for the construction works is a Consortium led by Framatome and includes Siemens. The Project Management Team is supported by a Consortium of EDF, Tractebel and Fortum. Other European companies will be involved in supporting the regulator, the operator and the Monitoring Consultant acting on behalf of the Lenders.

Before the loans can be signed, certain issues have to be addressed, including the reinstatement of the Extended Fund Facility by the IMF and the reinforcement of the structure of the nuclear Regulatory Authority. Other conditions are to be fulfilled before both Euratom and EBRD loans can be disbursed. These relate to the project implementation structure, the operation of the power sector in Ukraine, the State guarantee, etc.

Euratom is empowered to make such a loan on the basis of a Council Decision of 1994, amending its Decision of 1977 that extended the scope of its lending to certain countries including Ukraine.

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