ČEZ contracts BNP Paribas to search for Temelín financing partner

If ČEZ doesn’t opt to finance its nuclear power plant expansion alone, it will seek partners among energy giants in Europe and possibly Asia

Jaderná elektrárna Temelín. | na serveru Lidovky.cz | aktuální zprávy Jaderná elektrárna Temelín. | foto: © ILUSTRAČeská pozice
Jaderná elektrárna Temelín.

The French bank BNP Paribas has won a tender called by ČEZ to find a partner to finance the Kč 200 billion expansion of its Temelín nuclear power plant — if the Czech state-controlled power producer decides not to go it alone, Czech Position learned from a trusted source within the domestic energy sector.

Although no contract has yet been signed, ČEZ communications director Bohdana Horáčková confirmed that BNP Paribas has won the contract, beating out six other invited contenders: Citibank, Credit Suisse, Merrill Lynch, the Royal Bank of Scotland (RBS), Rothschild and HSCB (the only one not to submit a bid).

Making it to the second round along with BNP Paribas were Merrill Lynch and RBS — which failed to make the final run-off. The American offer was said to be less attractive in terms of price than that of the prevailing French bank.

ČEZ’s Horáčková said that all participants in the tender have been informed of the outcome, as has Czech Prime Minister Petr Nečas (Civic Democrats, ODS).

According to Czech Position’s information, prospective partners in the financing of Temelín will be sought primarily among European, but also Asian energy giants, with their stake in the project to be at most 50 percent.

Talk of Prague- and Warsaw-listed ČEZ taking on a financing partner has long circulated, with company CFO Martin Novák last raising the issue publicly in an interview with Bloomberg published on January 26. He told the news agency that ČEZ has been carefully monitoring the construction of nuclear power plants globally and the trend has been to share the associated costs and risks.

“We are definitely looking at models of how nuclear plants are built today in Europe. We are looking at forms of sharing the risk,” Novák said, adding that by taking on a financing partner, ČEZ would have greater space for investing in other ventures — although the state-controlled company, Central Europe’s largest in terms of market capitalization, is capable of financing the construction of Temelín units 3 and 4 on its own through a combination of cash flow and debt.

Novák told Bloomberg that cash flow remains the main source for the project to expand the nuclear plant in South Bohemia. ČEZ, whose current debt-to-earnings ratio is about 1.8, plans to raise cash on the bond market and bring the debt level up to 2.3 later in the decade to fund the construction, he told the news agency.

As Czech Position reporter on Jan. 24, the head of ČEZ, Daniel Beneš, and the government’s appointee overseeing plans to add two new nuclear reactors at the existing Temelín site, Václav Bartuška, have spoken up in favor of a British model of offering guaranteed prices for nuclear generated power aimed at financing new plants.

Neither ČEZ nor the Czech government have publicly gone into detail about how it intends to finance the proposed Temelín plants or what sort of state support or guarantees might be offered. The latest reflections about both follows a skeptical analysis by Candole Partners earlier this month of the economic arguments ČEZ can muster to back up the case for going ahead with the Temelín project.

The three bidders to carry out the Temelín expansion contract — France’s Areva, US-based nuclear company Westinghouse, and a consortium led by Russia’s Atomstroyexport and Czech nuclear industry supplier Škoda JS — are due to submit their offers to carry out the work by July 2, 2012. The choice of a contractor, or decision whether the contract goes ahead at all, should be made by the end of 2013.