Baltic Nuclear Project Agreement Can Be Signed Without Further Delay

Publication: Eurasia Daily Monitor Volume: 9 Issue: 96

Decommissioned Ignalina nuclear power plant (Source: Lithuanian Ministry of Economy)

Lithuania is reviewing possible options for nuclear fuel supplies to the Baltic regional nuclear power plant, projected at Visaginas in Lithuania. Japan’s Hitachi Corporation and its subsidiary, Hitachi-General Electric of the United States, are building that plant and will supply the nuclear fuel. According to the project’s Lithuanian CEO, Rimantas Vaitkus, the front-runner option for supplying nuclear fuel would be Kazakhstan (BNS, May 18).

Kazakhstan holds at least 15 percent of the world’s proven uranium ore reserves. It surged to first place worldwide for uranium extraction in 2009, consolidating its lead in 2011 when it surpassed the 33 percent mark of global extraction. The state company, Kazatomprom, produces nuclear fuel pellets. It aims to host a low-enriched uranium bank in Kazakhstan and to meet as much as 30 percent of global demand for nuclear fuel from 2015 onward. Kazakhstan is on course to becoming a supplier of uranium and nuclear fuel to the United States and other countries, Kazatomprom chairman Vladimir Shkolnik stated to the “Kazakhstan-USA: 20 Years of Partnership for Security and Development” conference just held in Astana (Kazinform, Interfax, May 18).

On May 17, the Lithuanian parliament passed legislation on building and operating the Baltic regional nuclear power plant in the first reading. This legislation is the centerpiece in a package that includes draft laws on the Klaipeda liquefied natural gas terminal, as well as a national energy security strategy, all recently approved by the government.

Under the nuclear project’s shareholder agreement, the constructor – Hitachi-GE – will hold 20 percent of the shares in the project company. Lithuania, Estonia and Latvia would hold 38 percent, 22 percent and 20 percent, respectively. The value of the investment is estimated at €5 billion ($6.4 billion) at current prices. The plant is expected to become operational between 2020 and 2022. The energy security concept for the electricity sector presupposes self-sufficiency in generating capacities and a reliable, cost-effective alternative source of electricity imports (BNS, Delfi.Lt, May 17).

The distribution of shares would change in the event that Poland (re)joins the project. The state-controlled Polska Grupa Energetyczna (PGE) in 2011 suspended negotiations on its possible participation in the Visaginas project. Apparently, the decision was made at the company level, not by the Polish government; but neither did the government clarify its own intentions. Reportedly, the project’s commercial terms did not meet PGE’s expectations. However, Poland is believed to be interested in electricity imports from the Baltic plant to meet growing energy demand in Poland’s north-east.

The Visaginas plant should replace the Soviet-era nuclear power plant, formerly located nearby at Ignalina. That plant’s two reactors were closed in 2004 and 2009, respectively, as a precautionary safety measure ordered by the European Union, without planning alternative options for electricity supply. Ignalina’s premature closure left the Baltic States overwhelmingly dependent on Russia for electricity supplies (on top of gas supplies).

The Lithuanian government, led by the Fatherland Union under Prime Minister Andrius Kubilius, has borne the brunt of work in recent years to replace the decommissioned nuclear plant. Vilnius organized the tender to select the strategic partner, negotiated the concession, and put together the consortium of three Baltic States. The Lithuanian government hopes to have the legislation passed in the final reading within four weeks, and to sign the concession agreement with Hitachi-GE before the end of June. Shortly after that date, the Lithuanian parliament will adjourn and the parties will launch their election campaigns ahead of the October 2012 parliamentary elections.

Opinion polls indicate that parties currently in the opposition are likely to do well in Lithuania’s elections. Among these parties, the left-leaning Social-Democrats and several small populist parties seem tempted to politicize the debate on the nuclear plant project for narrow partisan interests. The legislative package on this project and other energy security initiatives of the government was approved by a vote of 63 to 11, with 33 abstentions, on the first reading in parliament (BNS, Delfi.Lt, May 17).

That vote reflects a fragile consensus on the nuclear plant project in the run-up to Lithuania’s electoral campaign. The relevant parliamentary committees are now expected to present their conclusions. Disputing the government’s estimates, some Social-Democrats claim that the electricity to be generated by the Baltic nuclear plant would turn out to be more expensive per kilowatt/hour, compared with Russian-supplied electricity.

A group of 36 deputies from opposition parties are calling for a referendum on the nuclear plant project, to be held simultaneously with the parliamentary elections. The basic law on building a nuclear power plant was actually adopted by parliament during the previous electoral cycle, having been initiated by a Social-Democrat government in 2005-2006. However, some of these politicians seem to be calculating that voter sentiment has shifted since that time on the issue of nuclear energy.

Outside the parliament, another referendum initiative seeks to collect the necessary 300,000 signatures by the legal deadline of June 27. The government aims to sign the concession agreement with Hitachi-GE by June 28. The result de facto is a race against the clock for public opinion.  According to Prime Minister Kubilius, a fundamental difference exists between the two referendum initiatives. Citizens are entitled to collect signatures for solving any issue by means of a referendum. But when parliamentary deputies undertake such an initiative, they undermine investors’ confidence in the project and the host country.

The referendum proposal looks like an evasion of responsibility on the part of these deputies. The referendum would be “consultative,” but the question as drafted is a straight “yes or no.” It leaves these vacillating deputies free to interpret the referendum as they choose, opportunistically covering all their political flanks ahead of elections and in the new parliament.