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EBRD approves Ukrainian nuclear power project subject to strict conditions
Subject to four main conditions, the Board of Directors of the European Bank for Reconstruction and Development (EBRD) today approved the proposed loan for the completion and safety upgrade of two nuclear power plants in Ukraine, known as Khmelnitsky 2 and Rivne 4 (K2 and R4). The US$ 215 million loan to Energoatom, the Ukrainian state-owned company responsible for nuclear power generation, is to be guaranteed by the Government of Ukraine.
- The approval will become effective once the Board determines that the following conditions have been met:
- Confirmation that the Chernobyl facility has been closed permanently;
- A number of important safety assurances, including a report from international nuclear regulators that the Ukraine Regulator has the necessary independence and resources to assure operations of Ukrainian nuclear facilities according to western safety standards, a commitment from the G-7 and European Commission to provide technical assistance, and a commitment from the Ukrainian government to provide the necessary independence and resources to the country’s nuclear regulator;
- Approval by the International Monetary Fund’s Board of the Extended Fund Facility to Ukraine;
- Commitments by the other institutions expected to provide funds for the project.
- Conditions of the loan and the loan guarantee would also require enhancement of the safety, not only of K2 and R4, but of the other 13 nuclear facilities owned by Energoatom, and implementation of electricity-sector reform, particularly privatisation of energy-distribution companies and increases in tariffs and tariff collections.
- The Board, representing the Bank’s 61 shareholders (59 countries, the European Commission and the European Investment Bank), voted 63.7 per cent in favour of the project and 7.8 percent against, while 28.5 per cent abstained. The official tally, which excludes abstentions, was recorded as 89.05 per cent in favour and 10.95 per cent against. (Figures reflect voting power as derived from the size of the constituencies’ shareholdings in the Bank.)
- In 1995 the G-7 countries, the EU Commission and the Government of Ukraine signed a memorandum of understanding regarding the closure of the Chernobyl nuclear power plant. The EBRD was asked to play an important role in a possible financing of the completion of K2 and R4 to replace the Chernobyl facility, as well as to administer about €1 billion in nuclear safety funds from 25 donors countries and the European Union.
The project’s total cost is $US 1.48 billion. The proposed financing plan of the project is as follows (in millions):
EURATOM US$ 585.0
Export credit agencies 348.3
EBRD 215.0
Russia 123.7
Energoatom 158.6
Ukraine 50.0
The EBRD’s overall commitments in Ukraine to date total €950 million. The EBRD is taking an active role in assisting the Government of Ukraine to reform its energy sector. In October the Bank signed a $US 100 million working-capital loan to four Ukrainian state-owned generation companies for the purchase of fuel this winter. In addition, the EBRD chairs the Energy Reform Task Force, which meets regularly in Kiev.
Other EBRD activities regarding nuclear issues
The EBRD has for many years placed significant emphasis on nuclear safety in the countries of central and eastern Europe and the CIS. The Bank is the administrator of the Nuclear Safety Account (NSA) and the Chernobyl Shelter Fund (CSF), both funded by donor countries. The NSA provides grants to improve safety in nuclear power plants throughout the region, including preparations for closing the Chernobyl facility. The CSF is assisting Ukraine in rebuilding the deteriorating sarcophagus around the wrecked Chernobyl reactor into a safe and environmentally stable shelter. This project, which will cost about US$ 760 million over eight to ten years, is known as the Shelter Implementation Plan (SIP). At the request of the European Union, the Bank has also established international funds to finance part of the costs of decommissioning first-generation Soviet-designed nuclear plants in Lithuania, Bulgaria and Slovakia.
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