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Mochovce budget may rise again

THE THIRD block of the nuclear power station of Slovenské Elektrárne in Mochovce is about 80 percent complete and will be put into commercial operation in the third quarter of 2016 and the fourth a year after that, according to Slovenské Elektrárne (SE).

THE THIRD block of the nuclear power station of Slovenské Elektrárne in Mochovce is about 80 percent complete and will be put into commercial operation in the third quarter of 2016 and the fourth a year after that, according to Slovenské Elektrárne (SE).

SE is 66 percent owned by the Italian conglomerate Enel, with the rest owned by the Economy Ministry. The general assembly of the electricity producer, expected to deal with a new budget that would allow the above plan to become a reality, is scheduled for later this month. SE management has not specified the planned increase in the budget, which has already increased to €3.8 billion over the course of the project.

The postponed completion of Mochovce and an increasing budget is a worry for Prime Minister Robert Fico’s cabinet.

In spite of costs running over and delays in the plan, SE CEO Luca D’Agnese sees investments into the third and fourth blocks of Mochovce as increasing the value of the stake, which is for sale. He added that the company will only sell if the right offer is made.

“We will see what the offers are, we will see what the state will do,” D’Agnese said at a meeting with journalists on October 7.

The sale process is still in the discussion phase and potential buyers have not submitted any offers yet.

Fico, who frequently criticises SE for the delayed completion of Mochovce, insists that the nuclear project will go forward.

“I simply can’t imagine [it being cancelled at this point],” said Fico. “I assume that this is one of the largest investments ever made in central Europe in such difficult economic times. There’s an enormous amount of people involved, and if we manage to connect to the North-South high-voltage grids ... there’s a huge market for electricity today, particularly in the Balkans.”

Fico added that countries with domestic production capacity will be “extraordinarily strong players on the European stage”. He believes that there are still some reserves in the existing €3.8 billion budget.

Completion of the Mochovce blocks is financed also from SE dividends and the leaked information speaks about an additional €800 million to complete the blocks.

“We, as the state, have 34 percent in SE and thus have a certain say in the matter,” said Fico. “The priority of everyone is to complete the construction of the third and fourth blocks of Mochovce. Thus we’ll simply wait for the proposal, see what the increased resources are to be allocated for and based on it we will make the decision.”

The project to complete the two units of the Mochovce nuclear power station was launched in 2008. The original €2.8-billion plan was to complete the third unit in 2012 and the fourth in 2013. Later the budget was increased to €3.8 billion and deadlines extended to 2014 and 2015, respectively.

Enel explains the delay and higher costs as necessary after changes were made to the project in the wake of the Fukushima accident in Japan. For the Slovak side, this means allocating additional funds and postponing incomes from the sale of electricity generated by the new reactors.

D’Agnese and the head of the Mochovce project, Giancarlo Aquilanti, recalled that the construction of the Mochovce nuclear power station, consisting of four VVER 440 pressurised water reactors, started in 1981, while the first two blocks were completed in 1998 and 1999, respectively. Since this time the development and, especially the Fukushima accident, have brought new requirements and thus the completion of the second two blocks of Mochovce with 471 MWe output each is not just repeating the course of construction of the first two blocks, but it is a completely new, evolving project. Apart from this, the gap between the completion of the first two blocks and the launch of completion of the second two blocks brought a loss of expertise and specialised human resources.

The sale

Earlier this year Enel offered a 66 percent stake in SE, along with other assets for sale, as part of a plan to cut debt. The estimated value of the stake in SE ranks from billions of euros to negative value because of the outstanding Mochovce issues.

The head of Czech energy giant ČEZ, Daniel Beneš, has hinted for the Ihned.cz website that the price of the 66-percent share of SE might be zero or even negative. ČEZ is one of the companies to have showed interest in purchasing the stake. Nobody knows exactly how much it will cost to finish the Mochovce reactors and when they could start operation, the Sme daily wrote on October 1.
“The risks have likely a higher value than the whole value of the firm,” Beneš said, as quoted by Sme.

The risk is connected mostly to the unclear prospect of profits that should be brought by Mochovce in the future. The prices of electricity in the international markets stand at no more than €35 per MWh. Just a few years ago they were three times higher.

In this respect D’Agnese said that nuclear power stations are built to generate electricity for 60 years and this is far beyond the ability to estimate electricity prices in the future and that the return of investments in the case of such long-term projects are calculated on long-term average electricity prices.

“But over the long term, the return [of investments] is of course very stable, if you take the long-term average of the prices,” said D’Agnese.

ČEZ has already said it is interested in purchasing the 66-percent stock in SE currently owned by Enel. Beneš assumes that much will depend on negotiations with the Slovak government. He is talking mostly about “guarantees” that should bring guaranteed higher prices of electricity produced from a new source that would be paid by consumers.

Other companies which have shown preliminary interest publicly are Russia’s Rosatom and Czech Energetický a Průmyslový Holding (EPH) while the China National Nuclear Corporation (CNNC) was mentioned in the past as a potential buyer too.

The state is also playing with the idea of acquiring shares in SE, either the whole 66-percent stake offered or a 17-percent stake to increase its current 34-percent stake to 51 percent. One of potential sources of money needed for the purchase is the sale of its stake in Slovak Telekom.

“We know that Enel intends to sell its share that it purchased from Mr [former prime minister Mikuláš] Dzurinda and his government [1998-2006] a few years ago,” said Fico on October 8. “It’s our duty to look into the potential benefits or disadvantages involved if the state attempted to repurchase 66 percent of the company’s shares. The Economy Ministry is working on such a project at the moment. There are others today, however, with an interest in buying whatever part of SE is offered for sale by Enel.”

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