S E C R E T SECTION 01 OF 02 SOFIA 000363
FOR SPECIAL ENVOY FOR EURASIAN ENERGY RICHARD MORNINGSTAR
FOR USEU ENERGY OFFICER RICHARD FROST
FOR EUR/CE JENNIFER HOOVER
EO 12958 DECL: 07/01/2034
TAGS ENRG, IAEA, PREL, PGOV, BU
SUBJECT: BULGARIA: BELENE NUCLEAR POWER PLANT: MORE
REF: A. SOFIA 0069 B. SEPTEL
Classified By: Ambassador Nancy McEldowney for reasons 1.4 (b) and (d).
¶1. (S) SUMMARY: Bulgaria’s highest profile energy project -- the Belene Nuclear Power Plant (BNPP) is dogged by cost overruns, financing woes, construction delays, and now serious safety and quality assurance concerns. Belene may end up costing Bulgaria more than money in the long run. Despite the repeated objections by project experts, END SUMMARY.
SAFETY AND QUALITY IGNORED
¶2. (S) Marred by many technical, political, and financial problems, the Belene NPP project continues to move forward despite strong warnings about project safety and quality by project experts. NEC, which controls 51 percent of the project along with strategic investor Germany’s RWE with 49 percent, keeps pressing to start the “Site Preparation Phase” in September 2009 even before the “Demolition Phase” is completed in August 2009. (Demolition Phase includes the destruction and removal of the existing old site infrastructure.) According to project insiders,
¶3. (S) Pressed to meet its own self-imposed deadlines, XXXXXXXXXXXX to the “overnight creation” of temporary structures, and the lack of a Quality Assurance (QA) Program Plan for the temporary structures. (Construction of temporary structures during the “Demolition Phase” and “Site Preparation Phase” is a routine process and facilitates the storage of equipment and manufacturing of key construction components such as concrete). XXXXXXXXXXXX
¶4. (S) Another problem area is the lack of an overall detailed technical and quality assurance plan for BNPP. As of late June 2009, Russia’s Atomstroyexport (ASE) -- Belene NPP’s main foreign contractor -- has yet to provide NEC with an overall Quality Assurance (QA) Program Plan. A QA Program Plan is required before the Technical Design Approval Order (TDAO) can be issued and certainly well before the Bulgarian Nuclear Regulatory Agency (NRA) can issue a Construction Permit for BNPP, making the targeted start dates of September 2009 and December 2010 virtually impossible.
LESS THAN A GLOWING ENDORSEMENT
¶5. (S) NEC is rushing to complete the “Demolition Phase” and start the “Site Preparation Phase” to make Belene look financially viable, attract additional international funding,
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and keep RWE as a strategic investor. Our contacts told us RWE will not provide funding until “financial closure” and it sees the “first concrete poured,” which is currently estimated for December 2010. XXXXXXXXXXXX
¶6. (S) RWE is clearly feeling “buyer’s remorse” about its participation in Belene. XXXXXXXXXXXX Belene experts said that RWE remains “in the dark” on most on-site day-to-day and technical issues. During a late May 2009 Belene project meeting, RWE asked numerous basic questions, indicating that they have not seen any of the on-site safety and environmental reports. XXXXXXXXXXXX Media reports theorize that RWE is trying to pull out of Belene. Some contacts suggest that RWE will wait until after the Bulgarian (July 5) and German (September) elections before announcing the fate of its future participation in BNPP, as GERB officials have expressed strong negative views toward the project.
¶7. (S) The current BSP-led government has repeatedly pushed for Belene, especially with 700 million euros in sunk costs and priceless political capital invested in the project. The Bulgarians and RWE initially wanted commercial financing for the entire project, but were unable to attract funding from Western banks -- wary of extending a large loan to an increasingly questionable project in the midst of the global financial crisis. In early June, Bulgarian Energy Holding (BEH) CEO Galina Tosheva confirmed Russian approval for a 3.8 billion EUR (5.4 billion USD) loan for Belene. The Bulgarians are still in the dark on actual details. Tosheva told us that she expects Russian PM Putin will dictate the loans terms directly to Bulgarian PM Stanishev.
¶8. (S) COMMENT: Vested interests -- the current BSP-led government, NEC, well-connected politicians, Bulgarian energy oligarchs, and Russian investors -- keep pushing the project. XXXXXXXXXXXX Since BNPP began, the corresponding technical documentation, the ongoing demolition, and site preparation activities have not been investigated, audited, or approved by the International Atomic Energy Association (IAEA). Bisser Boev, a member of GERB’s economic team, told us that as of late June, Belene also has no updated economic or technical feasibility study. We should encourage the next government to quickly begin its due-diligence on the project; stressing the importance of meeting all international safety and quality assurance standards, and bringing in the IAEA and the EU’s European Atomic Energy Community (EURATOM) to perform an on-site inspection. END COMMENT. McEldowney