Lithuania Chooses Hitachi-General Electric to Build Visaginas Nuclear Plant

Lithuania has chosen Hitachi-GE Nuclear Energy, a consortium of Japan’s Hitachi and General Electric of the US, as the strategic investor for the planned nuclear power plant in Lithuania. Runner-up in the bidding was another Japanese-US company, Toshiba-Westinghouse. This project should replace the Soviet-era nuclear power plant, which Lithuania had to shut down as a condition for joining the EU. That closure exacerbated the Baltic States’ dependence on Russia for energy.

The selection of Hitachi-GE marks the first time since the March 11 accident at the Fukushima 1 nuclear power plant that a Japanese company is chosen to build a nuclear power plant in another country. Lithuania’s decision means that Hitachi-GE has won the preferential negotiation rights for the project (Yomyuri Shimbun, Jiji Press, July 16).

The project envisages building a Baltic regional nuclear power plant at Visaginas in Lithuania, to supply also Latvia, Estonia and Poland with electricity. All four countries as well as the strategic investor are expected to finance the project as shareholders. The Lithuanian government selected the strategic investor based on pre-announced criteria including: the technology offered, the proposed cost of the project, the level of equity commitment as shareholder, evidence of ability to complete the project on schedule and on budget, readiness for a prompt start of preparatory work, and evidence of ability to build and operate the plant, as well as to decommission it at the end of the reactor’s service life.

The selected investor will provide the equipment, supply-chain consulting and nuclear fuel. Hitachi-GE will install two Advanced Boiling Water Reactors (ABWRs), with a capacity of 1,300 megawatts each. This is a third-generation nuclear reactor type, in service and on order in Japan and abroad. For its part, Toshiba-Westinghouse offered two AP 1,000 reactors, a “third generation plus” reactor type, with a capacity of 1,154 megawatts each (BNS, Delfi, July 14, 15; Lietuvos Rytas, July 15; Japan Today, July 19).

According to Lithuanian Prime Minister, Andrius Kubilius, The Lithuanian government assessed the two reactor types as equally advanced and reliable technologically, but selected Hitachi-GE’s proposal on commercial considerations: “This is a commercial project that must produce competitively-priced electricity” (BNS, July 15).

Estimates of the project’s costs have ranged between 4 billion Euros and 6 billion Euros ($5.5 billion to $8.5 billion). The Lithuanian government will now start negotiations with Hitachi-GE to finalize the financial terms and contractual details before the end of the current year. If these final negotiations turn out to be unsuccessful, the government reserves the right to negotiate with the runner-up bidder Toshiba-Westinghouse. The contract will be subject to parliamentary approval. Lithuania hopes to see the contract signed by the end of 2011, the start of preparatory ground work in 2012, actual start of construction in 2014, and the first electricity to be produced in 2020.

Lithuania had initially announced an open international tender for the project. Only the Korea Electric Power Corporation (Kepco) submitted a bid, but withdrew in December 2010 for undeclared reasons. The Lithuanian government then started direct talks with other companies, on the premise that the winner would have to perform the dual role of technology provider and strategic investor. Japanese companies showed interest in Lithuania’s project in the wake of the Fukushima accident. With the suspension of new nuclear power projects in Japan, and a political backlash against nuclear energy in other countries, Hitachi-GE and Toshiba-Westinghouse turned their attention to the project in Lithuania. The US participation made these options especially attractive in the Baltic region.

The new plant at Visaginas should replace the Soviet-era nuclear power plant at the same location, then known as Ignalina. That plant had supplied the Baltic States with electricity from the plant’s two RBMK-type reactors, commissioned in 1983 and 1987, with a capacity of 1,360 megawatts each. The European Union, however, required their closure as a safety precaution, stipulating this in the accession treaty with Lithuania. The two reactors were accordingly shut down in 2004 and 2009, respectively. An EU-assisted decommissioning process is ongoing.

That shutdown left the region with a deficit of electrical power. It forced countries to import electricity from Russia, raised costs to consumers, and added electricity dependence to the gas and oil dependence of the Baltic States on Russia. The regional project for a nuclear power plant enjoys public support in the Baltic States for both economic and security considerations.