Completing the Cernavoda-2 Reactor: A Bad Risk for Canada

David Martin
Campaign for Nuclear Phaseout
March 1, 1999

Summary

Twenty-five years ago, the former Ceaucescu regime had plans for 15 to 20 CANDU reactors. However, forced labour was used on the Cernavoda nuclear station, and faulty construction and manufacturing were widespread. After Ceaucescu was deposed in 1989, much of the nuclear infrastructure in Romania was dissolved, and only one reactor was completed. The first CANDU reactor at Cernavoda went into operation in December 1996 — about 20 years after the first agreement between Canada and Romania was signed.

Although about 25% of the basic work on the second reactor was done, it is estimated that completion of the reactor will cost $750 million US (over $1.1 billion Canadian). It has been reported that Canada has already lent Romania a staggering $1.35 billion (and possibly much more… see below) which has not yet been paid back in full. In April 1998, Atomic Energy of Canada Limited (AECL) and its partners committed to provide another $200 million in order to keep the project alive. AECL leads a consortium with the Italian company Ansaldo. In May, Romanian President Emil Constantinescu visited Canada asking for over $1 billion more financing, with special concessionary terms, in order to complete the reactor. Because of its weak financial position and slow movement on market reforms, the International Monetary Fund (IMF) has put a constraint on Romania against taking large foreign loans, such as would be required to complete Cernavoda-2. Concessions demanded by Constantinescu include: release from the requirement to provide a 100% guarantee for Canadian loans; longer payback periods for loans; and a four-year holiday before loan payments start. Moreover, under the terms of the Consensus Agreement of the Organization for Economic Cooperation and Development (OECD) Canada is forbidden from offering concessionary loans in order to promote the sale of nuclear power plants.

It has been reported that Romania now has four times more electrical capacity than it needs. So it is clear that electricity from the Cernavoda-2 reactor is NOT needed in Romania. Prime Minister Chrétien has suggested that Italy may buy electricity from Cernavoda-2, but there is no contract and the terms of such a deal have yet to be negotiated. Needless to say, this is a risky and ill conceived project.

Once again Canadian taxpayers are being asked to foot the bill for a nuclear reactor that is not needed, and is being opposed by environmental groups in Romania. CANDU reactors entail unacceptable economic and environmental costs, and like other reactors designs, there is the risk of catastrophic accidents. There are cheaper, cleaner, and safer ways to generate electricity. Renewable energy and efficiency are the real solutions to global warming, and natural gas is a relatively clean transitional fuel. If Canada wants to help Romania, aid should be provided for efficiency measures and renewable energy.

The Economic Costs of Giving CANDUs to Romania

Despite repeated requests from Nuclear Awareness Project, Atomic Energy of Canada Limited (AECL) and the Export Development Corporation (EDC) have refused to confirm that total amount of loans made by Canada to Romania for the Cernavoda nuclear plant and how much of those loans are still outstanding. We only know for certain that these loans have not been paid off. We do not know the terms of these loans — to what extent they have been concessionary, and what, if any, guarantees have been provided by the Romanian government. Disclosure of this basic information should be a pre-requisite before the Cabinet approves any more high-risk loans to Romania for completion of the Cernavoda-2 reactor.

It has been reported in the media that Canadian loans to Romania for Cernavoda have totalled $1.35 billion [1], however the actual amount of financial support may have been much higher. The loans to Romania began in 1979, when a financing agreement for $1 billion was announced by Canada’s Export Development Corporation (EDC). The EDC loaned $680 million (US) and a consortium of banks loaned US $320 million. [2] It was the largest long-term loan of all time for EDC in a single export sale. The financing agreement was for four 600 MW reactors, but detailed agreements had only been signed for one reactor, and only one reactor was ever completed.

In 1980, former Romanian dictator Nicolae Ceaucescu asked for a ‘countertrade’ agreement whereby Romania could export goods instead of paying cash. The simple reason for this is that Romania simply could not afford nuclear power. Apparently in an attempt to promote the countertrade arrangement, the Romanians agreed to a second reactor [3], and higher Canadian content in both of them. However, in March 1982, the deal collapsed when Romania, which had been borrowing heavily, found itself unable to meet its debt payments. Canada refused to enter into a barter agreement, and in June 1982 the EDC, along with the US Export-Import Bank, stopped payment on all goods and services. The suspension lasted over a year. However, the $320 million from the bank consortium had already been disbursed.

In August 1983 AECL made another attempt to salvage the CANDU deal, when it convinced the Canadian government to offer a $2 billion line of credit for two reactors — half from EDC to finance countertrade for CANDU suppliers. It has never been made clear what arrangements were finally made, but it has been reported that AECL and a small number of companies received cash for their contributions, but a larger number of suppliers, about 50, were left to make barter deals with the Romanians Ð reportedly involving goods such as steel, textiles, and tractors. The import of Romanian steel plate apparently led to charges of dumping from Canadian producers. The value of the deal has never been made public, although it has been reported in the media to be worth about $700 million. [4]

The New York-based Hungarian Human Rights Foundation has charged that countertrade for CANDUs led to food and energy shortages in Romania. [5] In an effort to pay off Romania’s $12 billion debt, food rationing and restrictions on energy consumption were implemented after 1983. [6] By 1988, Romania’s national debt had been cut in half, but popular unrest had mounted, eventually leading to a revolt and the execution of Ceaucescu in 1989. It has since become clear that Romania’s commitment to nuclear power played huge role in the impoverishment the country which led directly to the overthrow of the communist regime. It has been estimated that about $10 billion (US) was spent on the nuclear program in the 1980s. [7] This massive investment has resulted in only one operating reactor that represents less than 4% of the country’s total installed electrical capacity. Adding to the scandal, throughout the 1980s and even into the 1990s after the revolt, forced labour (the so-called “black battalions” of conscripted labour) was used in construction at Cernavoda with the knowledge of AECL.

In September 1991, the Canadian government announced a new agreement to form the AECL/Ansaldo Consortium (AAC) to salvage the initial reactor. The salvage package included: a loan of $315 million through the EDC; takeover of project management by AECL and Nuclear Construction Managers; and provision of services and components from other Canadian companies. [8] The other partners in the consortium included Ansaldo of Italy (balance of plant), and the Romanian utility RENEL. The Italians apparently came up with $150 million in funding (through the Medio Credito Centrale) [9], and the Romanians had only confirmed funding five years later in an undisclosed amount of “something less than $100 million”. [10] By April 1995, $222 million (US) of the 1991 Export Development Corporation loan was still outstanding on the Cernavoda reactor, and costs had mounted to $2.2 billion — on a reactor that could have been bought as a turnkey project in 1995 for about $1.4 billion. [11]

On April 27, 1998, AECL made the most recent announcement of Canadian financial support for the Romanian nuclear program

– – this time for completion of a second reactor at Cernavoda (Cernavoda-2). AECL announced a $142 million (US) (about $200 million CDN), 9 month program, with the EDC providing an unconfirmed percentage. The AECL news release stated that the “Canadian scope of the project [is] worth $80 million…”. [12] It has also been reported that Romania will only be able to provide $40 million (US) of the financing. [13] It can be assumed that once again, Canadian taxpayers will provide the bulk of financial support, by special order of Prime Minister Chrétien and the Cabinet.

During his visit to Canada, Romanian President Emil Constantinescu took the opportunity to rail against western countries that demand “crippling loan guarantees”. [14] EDC President Ian Gillespie has said that the Romania does not want to provide a 100% guarantee for any Canadian loan. In addition, Romania wants a longer payback period and a four-year holiday before loan payments start. [15]

Romania’s financial demands are not only for the current $200 million in financing currently being negotiated to keep alive the Cernavoda-2 project. They are also demanding these sweetheart terms for the total completion package for Cernavoda-2, which will cost (according to AECL) an additional $750 million (US) or over $1.1 billion Canadian. It has been estimated that the Cernavoda-2 reactor is 25% complete (about 63% of the civil work and 4% of the electromechanical work has been done). [16] On May 25, during his visit to Canada , Romanian President Emil Constantinescu asked Prime Minister Chrétien for another $1 billion loan. [17]

Because of its weak financial position and slow movement on market reforms, the International Monetary Fund (IMF) has put a constraint on Romania against taking large foreign loans, such as would be required to complete Cernavoda-2. [18] Moreover, under the terms of the Consensus Agreement of the Organization for Economic Cooperation and Development (OECD) Canada is forbidden from offering concessionary loans in order to promote the sale of nuclear power plants.

Report written by David Martin, Nuclear Awareness Project, nucaware@web.net

Endnotes

1. Ray Silver, “Romanians Seek Funds to Finish Cernavoda; Eye Exporting Power”, Nucleonics Week, May 28, 1998, p. 3. See also: Allan Thompson, “Romanian Reactor needs Canadian cash”, Toronto Star, May 26, 1998, p. A6.

2. Export Development Corporation, News Release, NR 79-21, April 30, 1979.

3. Since this time, AECL, the Canadian Government and other nuclear industry sources have claimed that five CANDUs have been under construction in Romania. The outer shells of five reactors were constructed in a propaganda move by Ceaucescu, however, there has only ever been firm agreement with Canada to construct one reactor.

4. Ian Austen, “CANDU deal for food, goods, hurt Romanians, critics charge”, Ottawa Citizen, January 5, 1990.

5. Ibid..

6. “Turning back the clock in Romania”, Utne Reader, July/August 1988, pp. 28-29.

7. Mark Hibbs, “Romania hopes to save remains of $10 billion know-how investment”, Nucleonics Week, July 18, 1996, pp. 6-8.

8. Government of Canada News Release No. 199, “Canada approves loan for completion of Romanian nuclear power station”, September 17, 1991.

9. “Datafile: Romania”, Nuclear Engineering International, August 1993, p. 53. NEI reported that between them, the Canadian EDC and the Italian MCC financed the project in the amount of US $419 million. Funding from Romania was claimed, but not specified.

10. Ray Silver, “With funding found, RENEL readies for criticality of Cernavoda-1”, Nucleonics Week, February 1, 1996, p. 5.

11. Jennifer Wells, “Going Critical: Canada’s Nuclear Misadventure in Romania”, The Globe & Mail Report on Business Magazine, June 1995, p. 38.

12. Atomic Energy of Canada Limited (AECL) News Release, “Romania awards $200 million contract for work on Cernavoda Unit 2”, April 27, 1998.

13. Jennifer Wells, “Hold the Extras”, Report on Business Magazine, October 1998, p. 14.

14. Jeff Sallot, “Romanian leader rails against west”, Globe and Mail, May 27, 1998, p. A12.

15. Randall Palmer, “Italy offers to take Romanian nuclear power”, Reuters, May 25, 1998. See also: Geoffrey York, “Romania seeks reactor loan”, Globe and Mail, August 6, 1998, p. A12.

16. Ann MacLachlan, “Romanian government change puts Cernavoda-2 completion on hold”, Nucleonics Week, November 28, 1996, pp. 3-4. See also: Ann MacLachlan, “AECL offers Romania financing to begin Cernavoda-2 completion”, Nucleonics Week, March 5, 1998, p. 3.

17. Ray Silver, “Romanians seek funds to finish Cernavoda; eye exporting power”, Nucleonics Week, May 28, 1998, p. 3.

18. Ann MacLachlan, “AECL offers Romania financing to begin Cernavoda-2 completion”, Nucleonics Week, March 5, 1998, p. 3.

 

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