Saturday, May 22, 2010

U.S. And Russia Battle For Czech Nuclear Contract

The Czech Republic is the battle ground between the United States and Russia over a lucrative contracts to build new reactors in work that could be worth $25 million dollars.  Toshiba unit Westinghouse is up against Russia's Atomstroyexport, with France's Areva also bidding to build two new units at Temelin, in the south of the country, another unit at the Dukovany plant in the east, and possibly three more units in neighboring Slovakia.  U.S. President Barack Obama and his junior partner, Joe Biden, have pimped for Westinghouse, which retooled the old Soviet reactor technology at Temelin to bring that plant on line.  Czech officials say the stakes are high, no less than the future course of the country: east or west.  That may be a bit of overstatement, but the contracts are huge beyond the dollar signs. 

One Czech official puts it in pretty stark terms.

"By far the biggest issue over the next four years will be deciding who should be the supplier for Temelin," opined Vaclav Bartuska, the country's ambassador-at-large for energy security. 

Speaking to Reuters, Bartuska said, "The decision will define where this country wants to belong."

Judging by his remarks, Bartuska is another rank-and-file Russophobe among Eastern Europe elites.

"We really believed up to 1989 that making it into the EU and NATO meant safety.  It took us a few years after joining to realize the world is not so simple. I think it is a bad thing to look east."

When Russian President Dmitry Medvedev and U.S. President swooped into the city of spires, Prague, in early April to ink a much ballyhooed nuclear arms reduction treaty, it wasn't the only atomic topic on the agenda. 

Obama talked about the Westinghouse bid on Temelin with Czech President Vaclav Klaus, who also was sweet talked by Medvedev on the same topic.

There was some speculation in the Czech media that the Russians and Americans would announce a joint venture to tackle the project, a bit of hard substance to Obama's no-nuke world vision unveiled in Prague exactly one year ago. 

However, the Americans quickly squashed the kumbaya vibe, announcing they want to go it alone

However, the Russians have an ace up their sleeve.  AS Skoda, the engineering concern in Pilsen is part of the consortium with Atomstroyexport. 

AS Skoda has an inside track as well, winning a deal last year with CEZ, the Czech energy giant that owns Temelin and Dukovany, to service all the reactors at the two nuclear power plants.  

The Russians already have their fingers in AS Skoda, which is owned by a consortium, the Russian engineering and steel group OMZ.  

Will the Czech government shut the door on a Czech firm -- albeit with Russian ownership but employing Czechs -- already heavily involved in the running of the country's nuclear industry?

Logic would say no, (although AS Skoda says it could still get some of the nuclear booty even if the Russian-led bid fails.)

But don't count Westinghouse out.

Back in the 1990s, before the Japanese took control of Westinghouse's nuclear division, the then Pittsburgh-based company already had gained a less than stellar reputation for its 'efforts' to win contracts to retrofit Temelin's Soviet-designed VVER reactors and a fuel contract.

So keen was Westinghouse on winning the bids that they were accused of resorting to standard graft to win them.

On May 9, 1996, Mlade Fronta DNES reported that the bidding for a critical instrumentation and control system for Temelin [this is a key Western addition to the Soviet-designed complex] was done incorrectly. In a first round of bidding, Westinghouse bid $21.8 million, while Electricite de France bid $16.2 million. These bids were supposed to be kept secret. Despite its own rules, CEZ, the Czech utility, decided to solicit a second set of bids. This time, Westinghouse bid only $14.2 million, while EdF kept to its original bid. Westinghouse got the contract. The question is whether Westinghouse knew of EdF’s bid, and thus modified its own bid. An internal audit of the bidding process stated, according to DNES, "The protocols for negotiations do not contain any reasons that led to such a decision [to organize an additional step of the bidding], although such a procedure is very unusual and does not follow the rules for international biddings."

Two days later, DNES reported on another suspect bid. This time, Westinghouse had underbid its competitors in a contract for nuclear fuel for Temelin. When the first round of bidding was completed, Westinghouse had offered $22.6 million, Siemens had bid $36 million and Framatome had bid $34.5 million. Again, an unusual second round of bidding was held. The other companies held to their bids, while Westinghouse upped its bid to $33.6 million, and won the contract. Said a CEZ internal audit, "such an increase is hardly to be explained reasonably and according to TCT’s [Temelin Control Team] opinion, it may be linked with the disclosure of a business secret with negative impact for CEZ."

The scandal moved on, to accusations of bribery by a Westinghouse employee and slander against a CEZ director who voted against Westinghouse contracts. Details of an investigation into these allegations remain secret, at the order of the CEZ Board of Directors, whose members include the wife of Czech Prime Minister Vaclav Klaus. Meanwhile, the Czech police mounted their own investigation of the charges, but have been unable to obtain any indictments.

So much for those cleaner Western business practices.

Since those heady, corrupt days, Westinghouse has not made much of a dent in the Czech nuclear market.

In fact, the Russians have already outfoxed Westinghouse, securing a key nuclear fuel deal with the Czechs in 2007. 

The fate of the juicy nuclear deals likely hinges on the outcome of next week's parliamentary elections. 

The ruling right-wing ODS party are seen as more pro-American, and would probably favor Westinghouse. 

The opposition left-wing CSSD are seen as a bit more open to doing business with the Russians, and could opt for them, seeing that the Russians already have the nuclear fuel contracts.

Opinion polls show CSSD with a comfortable lead.

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