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The winner of the nuclear competition will be determined mainly by the financial, technological and guarantee parameters of the bids. Although the EdF group has already called a press conference on Tuesday morning, it will not disclose specific information about the tender yet. ČEZ will examine and evaluate the offers until mid-June, when it will submit an evaluation report to the government. Then maybe the public will finally learn something more.
With the information available today, it seems that the French have a better chance of success in the tender. There are more reasons.
First: EdF, which was fully taken over by the state last year, is in better financial shape than rival Korean Hydro & Nuclear Power (KHNP) and its owner, also the state-owned group KEPCO.
Last year EdF got out of trouble, which had previously dragged it into unexpectedly large-scale repairs and shutdowns of nuclear reactors at home in France. It turned the previous year’s loss into a profit of 10 billion euros (over 250 billion crowns), and managed to reduce its debt by roughly the same amount.
In contrast, KHNP’s parent holding, KEPCO Group, reported an operating loss of 4.5 trillion won (78.2 billion crowns) last year. A year earlier, its loss even exceeded 32 trillion won. In addition, KEPCO reported a total debt of 202.4 trillion won at the end of last year, equivalent to 3.5 trillion crowns.
KHNP itself was profitable last year, the converted profit corresponds to roughly two billion crowns. However, in the two half-years at the turn of the year before last and last year, it lost money, and the media wrote about how the parent company KEPCO is healing itself on its subsidiary companies.
In Poland, where KHNP should build the second planned nuclear plant in Piatnów, there are already doubts as to whether it will be able to do so. “The widespread opinion that the Koreans from KHNP will build reactors in Europe, and especially in Poland, quickly and cheaply, and will also significantly participate in their financing, does not seem so self-evident after the latest news,” writes, for example, the economic website strefainwestorow.pl.
According to some voices from the domestic nuclear industry, KHNP’s prospects were also weakened by the election results in South Korea, in which the liberal opposition won over the ruling strongly pro-nuclear conservatives in early April. The outgoing government wanted South Korea to be a strong nuclear global player. Democrats, on the other hand, are betting more on renewable sources, so government support for nuclear power may weaken.
The attitude of the French political leaders contrasts with this expectation. During the energy crisis, the local government set a drastic nuclear course, the implementer of which is to be EdF. It now has such strong support that President Emmanuel Macron himself lobbied for it in Prague at the beginning of March. The Korean competitor cannot boast of such a high-ranking supporter. But it’s not just the political weight of corporate lobbyists.
France is a European power with a strong influence in the European Union. If anyone has the power to further weaken European nuclear skepticism, it is the French. And they count on this task.
During his visit in March, Macron described nuclear energy as one of the pillars of friendship between the Czech Republic and France. According to him, the core is key in the transformation of Europe, it should be the basis for its independence and competitiveness. And the Czech Republic and France have to continue to strengthen and develop their pro-nuclear approach at the EU level.
It’s not just about proclamations. In European energy today, EU regulations and politics are more decisive than the free market. If we want to bet on the core, we need friendliness from Brussels for it. The alliance with France carries great weight. It would certainly be useful to strengthen it by awarding a prestigious Czech state contract to a French state company. It is difficult for KHNP to offer such a benefit.
One more factor can play against the Koreans. The companies KHNP and KEPCO are conducting a court and arbitration dispute with the American Westinghouse over the export rights to their APR1400 reactor, a scaled-down version of which they are offering to the Czech Republic. Westinghouse was involved in the development and the Americans say that the export of the reactors is subject to their approval. The Koreans reject it. The first court verdict was handed down in September of last year in the USA and it found the Koreans in the right. But the American company appealed.
At the same time, an arbitration proceeding before the Korean Commercial Arbitration Board is ongoing, where the intellectual property right of the disputed technology is being resolved. The final decision can be expected at the end of next year at the earliest, if the rivals do not reach an agreement out of court in the meantime.
If KHNP were to win the Czech contract, a possible loss in the dispute with Westinghouse could complicate the Czech project. However, the Ministry of Industry and Trade does not consider this to be a fundamental problem.
“The company that wins the tender for the new nuclear power plant will be responsible for the implementation and handover of the power plant according to the signed EPC contract. This will also contain appropriate guarantees that will cover any risks of non-delivery due to reasons caused by the supplier. The company KHNP has repeatedly assured the Czech side that it will be able to deliver and operate the new nuclear source according to the agreed schedule, and has provided information regarding the dispute in question. The Czech Republic is not a participant in any of the mentioned proceedings,” says Petra Milcová from the press department of the Ministry of Foreign Affairs.
What do the experiences with previous projects say about the positions of both candidates? In the Czech Republic, it is often emphasized that while the French deliveries of power plants in Finland’s Olkiluot, home Flamanville and Britain’s Hinkley Point are delayed for many years and are several times more expensive, the Koreans managed to complete their first foreign nuclear projects at the Barakah power plant in the United Arab Emirates on the promised dates and on schedule costs.
Even KHNP does not always avoid delays. The first two units of the Korean Shin Hanul power plant were completed last year and the year before with a five-year slippage against schedule. Because of this, costs have risen by roughly a quarter.
Another factor that, according to many Czech businessmen and politicians, should play a role in the competition is the involvement of domestic industry. According to an analysis by the University of Economics, Czech subcontractors could participate in the nuclear contract by up to 65 percent. With the construction of a single Dukovany reactor, this could mean an increase in domestic GDP by up to 234 billion crowns, an increase in public budget revenues by up to 96 billion, not to mention higher collection of taxes, social and health insurance premiums. Industrialists request that the obligation to use the potential of domestic companies be enshrined directly in the contract that CEZ will conclude with the winner of the tender.
Both bidders assure cooperation with Czech manufacturers and have also signed several memoranda in this regard. KHNP promises a turbine for the new Dukovany from the Doosan Škoda Power factory in Pilsen, which has Korean owners. In the event of its victory, EdF is preparing a joint venture with the Metrostav group, which should provide construction subcontracts.
Whether the obligation to use the potential of Czech suppliers will be included in the contract with the future winner is not yet clear. And memoranda are non-binding, you can’t rely on them.
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