The Government Has Decided on a Preferred Supplier for the New Nuclear Power Source at Dukovany
The Government has taken another significant step towards the construction of new nuclear power sources in the Czech Republic. At its meeting on Wednesday, 17 July 2024, it confirmed the selection of Korea Hydro & Nuclear Power Company (KHNP) as the preferred contractor for this strategically important project. Based on the bids from two bidders, France's EdF and Korea's KHNP, and their careful evaluation, the Government also decided to start negotiations on the construction of two units at the Dukovany site and on the possibility of contracting binding options for additional new sources at Temelín. This project will ensure the energy security and self-sufficiency of the Czech Republic for several decades to come. The government's decision on the preferred bidder will strengthen the country's energy independence and offer huge opportunities for domestic industry and the economy.
“We are deciding on a project for decades to come. The Czech Republic must be as energy self-sufficient as possible, and Czech households and the Czech economy must have sufficient energy supplies at an affordable price. This project will ensure this and with it a high quality of life, prosperity and competitiveness of our economy, said Czech Prime Minister Petr Fiala , adding: “Our goal was to come up with a solution that would be economically rational and provide enough energy at an affordable price. The offer of the Korean company KHNP meets these parameters. At the same time, it will bring a significant impetus to the development of the Czech economy thanks to the involvement of Czech industry to the extent of about 60 percent.”
The two bids were compared against the same criterion, namely the price per megawatt-hour produced at which the new unit from each bidder would generate electricity, taking into account all known risks associated with both bidders' bids. Around 200 experts were involved in the evaluation of the individual bids, following the recommendations of the International Atomic Energy Agency. In the preferred option, i.e. the construction of two units in one location at the same time, the price offered by the preferred bidder is around CZK 200 billion per unit.
“This is a truly historic project. Therefore, we have very carefully examined the evaluation of the offers from the ČEZ Group and considered all options for further action. It is clear that the preferred bidder offered a better price and more reliable guarantees of cost control, as well as the timetable of the entire project,” said the Minister of Industry and Trade, Jozef Síkela.
The Government also decided to start negotiations with the preferred bidder on the construction of two units at the Dukovany site and to contract an option for up to five years, during which time it will be possible to decide on the construction of two more units at the Temelín site. “Currently, nuclear provides more than a third of our electricity consumption and in the future it should be about half. That is why its development is crucial for us. The option of building two units on one site will also ensure that much of the work will not have to be done twice and will allow economies of scale to be exploited, leading to significant cost reductions. Specifically, about 20 percent per unit. That is why we have chosen this option. The possible use of the option for the construction of two more units can be decided, among other things, in connection with the development of the Czech energy sector,” added the Minister of Industry and Trade, Jozef Síkela, adding that he has long sought the widest possible involvement of Czech industry in the subsequent implementation of the project.
In addition to the fundamental development of the Czech energy sector, this project will also become an important stimulus for the Czech economy. “According to some estimates, every crown invested in the construction of nuclear units will bring up to three crowns to the Czech economy through downstream investments. It also means the creation of skilled jobs and consequently substantial revenues for the state public finances,” the Finance Minister Zbyněk Stanjura listed the economic benefits of the project.
According to the government's decision of January 2024, a working group led by the Ministry of Finance is working on a financing model for other units and the draft model will be approved by the end of this year. “We now have an approved public support and financing model for the first unit. This involves a combination of several instruments to ensure the economic viability of the project and protect the investor from external risks. It is primarily a state loan in the form of a repayable financial assistance with a maturity of 30 years, which, moreover, will not bear interest before the new units start operating. Furthermore, it is a protection of the investor against external risks and a commitment to purchase electricity for 40 years at a predetermined price, while respecting the principle of a bilateral compensation regime in relation to the price development on the market,” the Finance Minister Zbyněk Stanjura described.
The European Commission approved the public support model for the new unit at Dukovany at the end of April this year. Public support makes the project financially viable and attractive for the investor, ensures the return on the state loan and, last but not least, supports the Czech Republic's transition to low-carbon energy. Financing in the form of a repayable financial assistance is more advantageous for the project in terms of interest, which means that it significantly reduces the cost of the entire project and thus the price of electricity for consumers. The repayable financial assistance assumes 0% interest during the construction of the new nuclear power source, and 1% interest above the interest at which the state borrowed the finance, but at least 2% after the start of operation.
“Thanks to the fact that we also asked for options for other units in time, we got the possibility of comparison, but also much more favourable price conditions for the Czech Republic,” said Daniel Beneš, CEO and Chairman of the Board of Directors of CEZ Group, adding: “We have a clearly defined schedule that provides for a fixed date for the start and completion of construction, and it is important for us that the selected contractor commits to it under threat of sanctions. The preferred bidder's bid was more responsive in this regard.”
The tender procedure was launched on 17 March 2022. Initial bids from EDF, KHNP and WEC (for one unit at Dukovany with a non-binding option for three more units – EDU6 and ETE 3 + 4) were received by 30 November 2022. The amended bids were submitted by the bidders as of 31 October 2023. In January 2024, the government decided to invite two bidders (EDF and KHNP) to complete updated bids for a binding option to build up to three additional nuclear units (EDU 6 and ETE 3+4). The contacted bidders submitted them by 30 April 2024. EDU II submitted the evaluation report to the Ministry of Industry and Trade on 14 June 2024 as a basis for the final government decision on the preferred bidder.
Negotiations with the preferred contractor will now follow, among other things, on the option for more units, but also on the involvement of Czech industry. The contract with the contractor will be signed in the first quarter of next year. It is planned to secure a building permit by 2029 and start trial operation by the end of 2036, with commercial operation starting in 2038. Adherence to the construction schedule is subject to contractual penalties.
The evaluation was led by the team of Elektrárna Dukovany II and a total of 206 evaluators and experts not only from EDUII, but also from CEZ Group and consulting companies participated in the evaluation of the received bids throughout the tender.
All documentation associated with the bidders' tenders amounts to approximately 200,000 pages of documents. The total time spent assessing bids amounted to about 900 man-months, equivalent to 200,000 man-hours. The contracting authority sent approximately 2,700 questions to individual bidders and received answers to all of them.
