Czech government approves agreements with CEZ on new Dukovany unit

30 April 2020

The Czech government on 27 April approved two draft agreements (a framework and implementation agreement) with power utility CEZ for the construction of a new nuclear unit at the Dukovany.

Investment in the planned 1200MWe unit at Dukovany is estimated at CZK140-160bn ($5.6-6.4bn), according to deputy prime minister Karel Havlícek. The Czech government will now send draft agreements to the European Commission.
According to the agreements, the state will guarantee CEZ a regulated revenue for the new unit, which will represent "eligible costs and a reasonable profit". This should be in the form of a purchase price, which  should be similar to regulated tariffs in the distribution segment.

The contract for the first phase (tender for supplier) includes the project site, the period for supplier selection, which should begin in late 2020 with the finalisation between 2022-2024. CEZ will have the right to sell the project to the state at cost price.

The terms of the draft treaties mean that the new nuclear unit should be fully regulated and independent of market electricity prices. Electricity purchase prices should be based on investment costs agreed between CEZ and the state. The agreement on the supplier selection phase will also contain a put option for CEZ as collateral.

The government has previously announced that it will provide the project with financing that it will guarantee any additional costs incurred as a result of legislative changes. The remaining risk for CEZ is a possible excess of construction and project costs (excluding financing costs and the effects of legislative changes).

A third contract is being prepared, which will define the conditions under which the state will buy electricity from CEZ. The set price of electricity will be based on the economically justified costs of building a nuclear unit and a reasonable profit, not on market electricity prices. According to Havlícek, because of this agreement, it will be necessary to first prepare a law on transition to a low-emission economy. The government will seek the European Commission's approval that nuclear energy should be considered an emission-reducing source. This will make possible cheap funding. Havlícek said the government expects to decide on the method of financing by the end of May and the contracts will be signed by the end of June.

"Unfortunately, the European Union tends to omit baseload energy from so-called sustainable investments. This means that European banks are not very willing to finance new nuclear resources, which increases the price of loans," he noted.

He said the financial model has a number of variants so far. "We will put strong pressure on the EU to make the funding as cheap as possible, to accept that it is a low-emission source.” Construction of the new unit should begin in 2029, for operation in 2036, he added.

CEZ CEO Daniel Beneš said the company is working "intensively on all aspects of the project." He recalled that at the end of March, the company applied for a permit for the facility from the State Office for Nuclear Safety. "It is an extensive material of 1600 pages. At the end of the year we expect to start a tender for a new nuclear unit, with the supplier to be selected by the end of 2022 and then detailed contractual documentation will be negotiated, including confirmation of the subcontracting chain, and further steps will be taken, such as securing a site permit. "

The Czech government has long been in talks with CEZ, in which it owns a 70% stake, about replacing nuclear units that be retired in the coming decades

Currently, the Czech Republic has four nuclear units at Dukovany, each with a capacity of 510MWe and two at the Temelín each with capacity of 1055MWe. Dukovany, which started operation in 1985, accounts for a fifth of the electricity consumption in the country. The units have a 30-year design lifetime, but CEZ plans to keep them operating for 60 years.  

Photo: A fifth unit is planned for the existing Dukovany nuclear power plant (credit: CEZ)

Privacy Policy
We have updated our privacy policy. In the latest update it explains what cookies are and how we use them on our site. To learn more about cookies and their benefits, please view our privacy policy. Please be aware that parts of this site will not function correctly if you disable cookies. By continuing to use this site, you consent to our use of cookies in accordance with our privacy policy unless you have disabled them.