Tensions rise over Temelín bid

Legal appeals, the prospect Czech firms could help build nuclear power plants in the United States and the implications of the election of a new president: The public battle to win the contract to expand Temelín grows more complex as the decision edges closer.

The Czech utility ČEZ is due to announce by the end of 2013 who has secured the $10 billion tender to build two new reactors at the power plant in south Bohemia in a decision that, analysts often say, will hinge on geopolitics as much as technical prowess.

In the latest twist, Westinghouse Electric Company, based in Pennsylvania but owned by Japan's Toshiba, has rejected suggestions the recent election of Miloš Zeman is a setback for its bid to win the largest public tender in the Czech Republic's history.

Voicing a widely held opinion, the columnist Jiří Leschtina wrote last month in Hospodářské noviny that Zeman's victory would help the rival consortium, which includes Russia's Atomstroyexport.

Danny Roderick, Westinghouse's CEO, branded this idea as "just Russian propaganda," adding he had "no reason to think" Zeman's election would hamper the company's chances of being selected.

"Across the government sector we've been widely welcomed around the world, and we've worked with Czech government officials throughout this process. We have no reason to think anything will be different. Both of the [presidential] candidates spoke highly of the need to build nuclear [reactors]," he said.

He accused the other bidder of "disingenuous" activity, suggesting it was trying to pressure firms into aligning themselves with the Russian bid.

"It's disrespectful. They're creating this illusion that if you don't sign up with the Russians, you won't get any work. It's going to take this entire country to build this plant. This is one of the biggest projects the Czech Republic has ever attempted," he said.

Westinghouse supporters have said the Czech Republic should reject the Atomstroyexport bid in order to prevent the country becoming too dependent on Russia for energy, especially as the eastern neighbor is already a major oil and gas supplier. In addition, Russia provides fuel for Temelín's current two reactors.

Roderick also said the Russian bid would not benefit by offering better financing for Temelín's expansion, saying the European Union could "intervene" if there was an excessively generous financial package on the table.

The third bidder, France's Areva, was excluded in 2012, although Feb. 1 it filed an appeal against the Office for the Protection of Competition of the Czech Republic's decision not to suspend the tender.

Meanwhile, Westinghouse is trying to cement links with Czech companies to counter the promise by the Atomstroyexport consortium that if it was selected, 70 percent of the work would go to Czech firms.

Westinghouse has signed memorandums of understanding with four Czech steel companies, Excon Steel, Modřany Power, Vítkovice and Metrostav, that could act as suppliers should its bid be chosen.

Many potential suppliers are linked to more than one bid, with Excon Steel, for example, having also previously signed a memorandum of understanding with Areva.

Westinghouse has indicated that, if its bid was chosen, suppliers would be in a strong position to secure contracts to win contracts linked to AP1000 reactors the company hopes to build outside the Czech Republic.

Westinghouse has previously said that Vítkovice in Ostrava, as well as making construction modules for Temelín, would also produce them for other AP1000s in Europe.

Roderick indicated Czech steel suppliers, having upgraded their abilities to produce high-quality steel for the plant, could win contracts to supply even North American AP1000 reactors.

"In the United States, there are 104 reactors that are going to shut down in the next 20 years. These will have to be replaced or 20 percent of the U.S. electricity supply goes away. [But] the U.S. steel industry has gone overseas," he said.

"There's the [opportunity] for us to work in the Czech Republic because we need that central hub to be able to manufacture steel."

Yet it is unclear how realistic it would be for Czech steel suppliers to hope for contracts on Westinghouse nuclear plants built as far afield as North America.

"It's plausible [a Czech supplier would be chosen] if you're talking about specific pieces of steel, types of grades of alloys that potentially a Central European producer has some expertise in. But you're probably talking about relatively small volumes. It could be relatively insignificant to a large producer," said steel industry analyst Jeff Largey, head of materials and mining equity research for Europe at Macquarie Group.

"If it's a U.S. power plant, a lot of the steel would be sourced domestically because the freight costs are prohibitive, shipping steel from Europe to the United States."

Lubomír Gogela, a manager with Czech Machinery Cluster, a steel industry trade association, said both the Westinghouse and Atomstroyexport projects could create opportunities for Czech suppliers to secure work overseas.

He said, however, it was "not so clear" the selection of the Russian-led group would create as many chances.

"The Russian market is very difficult," he said.

Daniel Bardsley can be reached at
business@praguepost.com