ČEZ cancels Temelín tender after government says no to guarantees

The Czech energy giant ČEZ announced on Thursday it was cancelling a tender on two new nuclear reactors at the Temelín nuclear power plant. The deal - estimated as worth hundreds of billions of crowns - was shelved a day after the government stated it would not offer any state guarantees in the project. There were two remaining bidders in the deal, the US-based Westinghouse and Russian-led consortium MIR 1200, who have been left empty-handed.

Daniel Beneš, photo: Filip Jandourek

ČEZ CEO Daniel Beneš said ahead of the announcement Thursday that he wanted "clarity" by June on whether the government would provide state guarantees: this week he got his answer - a resounding 'No'. At its meeting, the government decided it was in no position to provide guarantees at a time when electricity prices were too low and the electricity sector too turbulent. To promise state guarantees, many observers agree, would have been a risky proposition.

That doesn't mean nuclear power in the future won't be an option, but certainly the government will have to go back to the drawing board to decide on how to proceed next time around. For one thing, mistakes made in the now defunct tender can be avoided, chief among them relying on ČEZ and not a newly created fully state-owned company to handle the deal. The original tender was problematic because ČEZ is 70 percent state owned while 30 percent is owned by minority shareholders. They could have protested the deal as too risky if it had gone ahead, with too many intangibles over the next 10, 20 or 30 years, and they could have argued that the management was taking irresponsible decisions. Not ideal for a company which is traded on stock exchanges worldwide. The response the next time around, could be the setting up of a government agency, 100 percent state-owned, which could oversee the construction of one or two new reactors over the next five to 10 years.

Temelín nuclear power plant, photo: Filip Jandourek

Further ahead, it is not yet clear whether the country will remain quite as committed to nuclear energy as had originally been planned, although nuclear power will likely play some part in the future energy mix. Simply put, ČEZ and the Czech government are making decisions in something of a void at the moment because there is still no word from Brussels, no clear decision on future climate change goals and carbon reduction targets. The government and ČEZ can wait until around the end of the year to make a decision on energy for the future, whether to commit to nuclear or stick with coal-fired power plants for the next 10 or 15 years or natural gas.

No final decision needs to be taken yet; on the other hand, the cabinet needs to get down to brass tacks and begin planning ahead as it rewrites its long-term energy framework. ČEZ warns that an energy shortage could still be threatened in 20 years, especially if the lifetime of current ageing nuclear plants are not extended.