Talks on nuclear plant break down

  • 2007-11-28
  • Staff and wire reports

VILNIUS - Lithuania's ambition to build an atomic power plant appeared increasingly troubled after talks between the state and a privately owned energy firm failed to get off the ground and a leading foreign bank described the project "expensive and risky" and criticized the government for underestimating costs.
The negotiations between the Economy Ministry and NDX Energija, a privately owned firm that operates the western half of Lithuania's energy grid, are necessary so that the Baltic state can create a state-run utility with sufficient assets and financial resources to handle the nuclear project, which will require billions of euros and possibly as much as a decade to complete.

NDX Energija believes that the utility the state wants to create should be an umbrella structure encompassing Lietuvos Energija, RST, which operates the eastern grid, and NDX Energija. The government, by contrast, wants to wrap the new entity within the existing structure of Lietuvos Energija.
The transformation of Lietuvos Energija into a national utility/investment company would create risks that the new plant would become dependent on Russia's electricity system, NDX Energija said in a statement Nov. 19.
"Lietuvos Energija maintains economic and business ties with Russia. Termination of commercial contracts with Russia's companies would pose numerous challenges," Darius Nedzinskas, chairman of NDX Energija, said.
"Therefore, we are offering an option that would leave the national investment company unaffected by those contracts. All parties of long-term contracts are creditors, and we would need to get their approval," Nedzinskas said.

Ownership division of the merged utility has also been a bone of contention. However, Prime Minister Gediminas Kirkilas tried to downplay this issue, saying that the main thing was the state would retain control over the utility.
"That is what the law envisages," he told Ziniu Radijas on Nov. 22. Ownership stakes "are not the most important issue," the head of government added. He also defended the presence of private capital in the project.
According to unconfirmed reports, an official appraisal of the three companies would provide for NDX Energija claiming a 35 percent stake, RST 33 percent and Lietuvos Energija 31 percent. Thus the state would control a 64 percent stake in the national utility.

Meanwhile, DnB Nord Bankas, one of Lithuania's biggest banks, described the nuclear project in a report as "very expensive and risky."
"The cost of a power facility of such a capacity (3,200 megawatts) would reach almost 30 billion litas (8.7 billion euros) based on preliminary estimates. We must not forget that prices for metals, construction materials and uranium are constantly on the rise. So its final cost can be even higher, and the electricity generated can cost more than imported energy," the bank said in its latest outlook report.
Previous unofficial estimates have priced the project at some 4 billion euros.

The bank's analysts said it was incomprehensible why Parliament took the key decision to build a new nuclear power plant based on a single study that cost only 20,000 litas.
"Decisions have to be made not only whether or not to build a nuclear power plant, but also how large it will be," the bank said, adding that Lithuania could become hostage to its own promises to Poland and other foreign partners.

The planned new atomic power facility would replace the Soviet-era Ignalina Nuclear Power Plant, due to be decommissioned in 2009. Latvia, Estonia and Poland are expected to join the project.