Czechs eye shortlist of global nuclear vendors

Czech moves to construct new nuclear reactors by addressing the crucial question of who and how they will be funded looks like it could be finally addressed. A proposed shake-up of energy company ČEZ aimed at paving the way for power plant construction is now going to be reviewed by a government appointed team of experts. But what reactors might the Czechs eventually choose?

Dukovany nuclear power plant, photo: ČEZ

Last time around ČEZ cancelled the tender to build new nuclear reactors in the Czech Republic in April 2014 saying that the project more or less did not economic sense given the government’s refusal to give guarantees that might make it work. Then, US nuclear construction company Westinghouse was in the driving seat in that tender ahead of the Russians with the French out of the game having failed to file the proper paperwork.

Four years down the line the nuclear market is dramatically different and ČEZ and the Czech government are attempting a different tack on the construction question. Westinghouse is now in bankruptcy administration. France’s Areva has morphed into a new state energy company amidst its own problems. But the Russians are still there and are joined by other companies and countries with fast developing levels of nuclear know-how and experience.

I talked to Washington-based William Freebairn, the senior managing editor of S&P Global Platts' nuclear publication Nucleonics Week, about how the so-called potential nuclear vendors that could be interested in building Czech reactors now line up. First of all, I asked how former favourite Westinghouse is now placed.

ʺWestinghouse, the pre-eminent US reactor vendor, is wounded and perhaps badly.ʺ

ʺCertainly Westinghouse, the pre-eminent US reactor vendor, is wounded and perhaps badly. It is in bankruptcy although the plan is for them to exit bankruptcy in the coming months. There is a package prepared financially to do so. But clearly between that and the fact that the high profile projects in the United States that featured the latest generation of their reactor design have experienced cost overruns and extreme schedule delays, this has contributed to what you might imagine would be a difficult sales pitch when they are walking and trying to sell reactors to other countries. They don’t have projects they can point to as very successful. So that’s obviously going to be a challenge although they have indicated that they want to be in this business.

ʺThey don’t want to be involved in the construction portion of the business. They want to leave that to local companies and international companies that specialise in construction but they would like to provide the reactors themselves. And they are talking with India, they are continuing to talk there. It’s really the only country outside of China and the U.S. where there might be a future for their reactors at this time. So, only time will tell how badly they have been affected by their bankruptcy and US project problems.ʺ

If we take a wider worldwide view, who at the moment among the constructors is doing fairly well as regards international orders and presence? I mean, the Russians are very aggressive seller aren’t they and they appear to be selling quite widely across the world?

William Freebairn, photo: archive of William Freebairn

ʺThat’s right. You can look across the world and you can see a Russian nuclear industry which is completely state-owned and is really an instrument of state power. And they look at nuclear energy as a sort of geo-strategic way to expand Russian influence. Therefore you see in Bangladesh, in Belarus, in China, in Turkey, and possibly in Egypt that they projects on the books and some are at the planning stage. And some of them are even in construction to build Russian-designed reactors in some of those countries. They have a variety of different financial packages and some of them are very attractive, especially to countries just starting out in nuclear energy. So they are a dominant vendor right now and you can’t discount Rosatom, the state nuclear company. They have the support of the Kremlin and have Vladimir Putin as their top salesman. So it’s an impressive proposition.ʺ

And could we say if the French are out of the game given the problems they have had with their latest new generation of reactors that are heavily overscheduled and over cost? Have they lost most of their credibility?

ʺYes, it’s ironic that the U.S. and France, the two countries perhaps most closely identified with nuclear energy, both of their main vendors are in some level of disarray. The French nuclear energy has been completely reorganised. The government has put a lot of money in to keep the companies going. They have moved the reactor business into the national utility, EDF, and they are going to go out and try and sell reactors. There again they have projects of their next generation of reactor design, the EPR, that have not gone smoothly. And it will take until at least until those reactors are up and running somewhere in the world for France to go out and sell more of them. That’s also true of Westinghouse and its APR 1000. There’s going to have be some proof before people line up to purchase reactors of those designs.ʺ

Looking towards Asia now, one thing that has been noticeable in Prague is that the South Koreans have been showing quite a lot of interest in some way or another in whatever tender the Czechs might or might not have. Are they well placed in any way to offer technology?

ʺLike Russia, China sees the export of nuclear reactors as part of their strategic policy in the world.ʺ

ʺYes, South Korea’s Korea Electric Power and Korean Power and Hydro and Nuclear have a reactor design that is being built on time and schedule and on budget, as far as we know, in the United Arab Emirates. Like I said before, this goes a long way to persuading people that you have some expertise to offer. People will be a lot more confident in going to South Korea to acquire reactors because they will be able to point in a matter of months to two operating reactors of their design which they have built on schedule, pretty much, in an outside country.

ʺThe problem they have domestically is that the South Korean government is frankly anti-nuclear and domestically is talking about shutting reactors. So there will be a little cognitive dissonance to be on the receiving end of a sales pitch from a country where they are considering shutting down their domestic reactors gradually. So that’s their challenge. But in terms of new technology they are going to have some brand spanking new reactors running in the Middle East and this will be a nice feature to their selling offer.ʺ

And then the Chinese….The Chinese are building a lot of reactors, mostly based on other people’s technology. But how far are they away from offering that technology perhaps with their add-ons as part of their package?

Dukovany nuclear power plant, photo: CTK

ʺLike Russia, China sees the export of nuclear reactors as part of their strategic policy in the world. They see it as a way of projecting influence and they are becoming more and more active. They have an historical relationship with Pakistan where they are building what they describe as domestically designed units. These are units that have evolved from earlier Western designs. They have improved them and they have been building them. China is certainly the country on the planet that is building the most nuclear reactors and they have the most experience in nuclear construction and design improvements recently. Argentina, Romania, and the United Kingdom are places where China might build reactors. So it’s easy to see China expanding and offering reactors throughout the world and Eastern Europe is clearly a place where they have some interests. So I would expect them to be a fairly competitive player in this Czech nuclear project.ʺ

But at the moment the Chinese do not have anything abroad, it’s all up and coming as it were?

ʺTechnically they have built a number of reactors in Pakistan, so that’s what they have done. They really have a long relationship with Pakistan in terms of building reactors. In terms of next generation designs, moderns designs, they are under construction in Pakistan but they are not operating anywhere with their latest designs.ʺ

And maybe a final question, from all of these constructors is it possible to say whether anyone is making any money from construction or is it impossible to tell?

ʺYou have to think of the nuclear reactors as a razor and blade business.ʺ

ʺRussia and China are not particularly interested in making money. Even South Korea, it’s not clear whether they are making much money in the UAE deal. Someone was telling me in the nuclear industry the other day that you have to think of the nuclear reactors as a razor and blade business. You can sell the razor at cost because your business profits will come from selling the razor blades. And in this case the razor blades are the nuclear fuel assemblies. These are highly customised portions of the reactor. The reactor requires them for 60-80 years, potentially 100 years. A lot of times the reactor is sold with a lifetime contract or at least a multi-decade contract for fuel. And ultimately many of these vendors are looking at the fuel services business as one of the real benefits of building a reactor of your design in another country. ʺ