The European Commission, The European Bank for Reconstruction and Development and the Completion of Khmelnitsky 2 and Rovno 4 Nuclear Reactors in Ukraine.

FEBRUARY 1997.

Executive Summary.

Due to the stagnation of the Western European nuclear industry in 1994 the European Commission was authorised to help co-finance the construction of nuclear reactors outside the European Union, on the condition that a major proportion of the expenditure was provided by a Community enterprise. As a result for the past 3 years the European Commission has been searching for projects in Eastern Europe which fit their criteria. A number of Soviet designed part built reactors in the region were or are being assessed as potential recipients of these loans notably; Kozloduy 5 and 6 in Bulgaria; Mochovce in Slovakia; Kalinin and Rostov in Russia; and Khmelnitsky 2 and Rovno 4 in Ukraine.

In June 1994, within 6 months of the Ukrainian Government's decision to continue construction at Khmelnitsky 2 and Rovno 4 (K2R4), the European Commission declared that the total cost of completing these reactors, as well as an additional reactor at Zaporozhe and the closure of Chernobyl, would cost ECU 1.3 billion ($1.6 billion). The latest estimate for the completion of K2R4 is $1.2 billion with a further $1.4 estimated cost of closure of Chernobyl. The Commission also concluded that after looking at alternatives the completion of the reactors was the cheapest option. It is now transparent that this early estimation of the costs associated with the completion of the reactors has been drastically underestimated and by making such categorical statements the European Commission has had a detrimental effect on the development of Ukrainian energy policy.

As a result of this preliminary assessment between 1994 - 97 through the TACIS programme, the European Commission awarded over ECU 30 million in grants for the restart of construction at K2R4, prior to any final decision by the G7 to become involved.

In 1994, the European Commission stated that one of the conditions for their involvement in the completion of K2R4 was to enable the reactors to reach full Western safety standards. This safety objective has now been lowered and now the Commission is aiming to have the reactors completed to a standard similar to that designed in the West during the 1970s i.e. without modifications made following the Three Mile Island and Chernobyl accidents. From the preliminary results available it is clear that even this lower standards will not be achieved.

Another condition for the involvement of the G7 and the European Bank for Reconstruction and Development (EBRD) in the completion of K2R4 is that it is part of the least cost plan. To assess this the EBRD established an independent panel to review the economics of completion. This multinational panel have concluded that "K2R4 are not economic. Completing these reactors would not represent the most productive use of $US 1bn or more of EBRD/EU funds at this time". Therefore, the EBRD cannot, under the terms of their Energy Policy assist with financing of the reactors. In addition, as the Memorandum of Understanding (MOU) insist on a positive economic assessment it is clear that the European Commission must also stop funding the work to restart the reactors and use the remaining financial resources to decommission the unused facilities.

It is no surprise that the EBRD's panel have concluded that the completion of reactors is not the least cost option open to Ukraine as the economics have been in question for a number of years. The only surprise is that the TACIS programme has been allowed to invest so substantially in the reactors prior to any final decision. Of equal concern is that other similar proposals are being prepared for Russian reactors, knowing that economic analysis is likely to produce similarly negative results.

There are a large number of alternatives to nuclear power in Ukraine which will enable the rapid and permanent closure of the Chernobyl nuclear power plant and remove the need for the completion of K2R4. Already over US$2 billion non-nuclear energy and electricity loans are being prepared by EBRD and World Bank, these must be developed further and expanded upon.

As a result of the current situation Greenpeace has the following demands:

• That the Ukrainian Government takes note of the findings of the EBRD Panel and abandons the construction of reactors at Khmelnitsky and Rovno.
• The European Commission, the EBRD and the G7 formally withdraw from negotiations surrounding the completion of the Khmelnitsky 2 and Rovno 4.
• That the member Governments of the countries of the P8 (G7 countries plus Russia) and EU recognise this decision and do not allow it to be undermined by signing bilateral agreements to fund the completion of these reactors, which is not in the economic interest of Ukraine.
• That the ability of the European Commission to lend for completion or life-time extension nuclear projects outside the Union should be abandoned.
• A comprehensive external audit of the PHARE/TACIS programme should be made.
• In order to apply a general rule, 5% of each contract value under any nuclear assistance programme should be used for project evaluation by independent experts.
• An energy development plan, as previously requested by the European Parliament, should be drawn up, the objective of which should be the diversification of electricity production sources, the efficient use of energy and the phase out of nuclear energy.
• That should the project proceed the project sponsors ensure that there is full public consultation throughout Ukraine and in neighbouring countries.