Russian floating nuclear plant builder Sevmash diverting cash to other projects


Publish date: July 8, 2008

Written by: Vera Ponomareva

Translated by: Charles Digges

ST. PETERSBURG - The construction of the Russia’s first floating nuclear power plant, the Mikhail Lomonosov, has been ceased because its main contractor – the Sevmash factory - spent the money earmarked for the plant on other project, and have not even begun the realisation of the floating nuclear facility, sources at the plant told Bellona Web.

The misappropriations of funding are symptomatic of larger problems facing the construction of the controversial plants, which are facing budget shortfalls in other areas and a lack of domestic and foreign custormers that would justify Russia’s dogged pursuit of the half-baked notion of avant garde nuclear production.

The current financial constipation and sinking international interest could consign the colossal undertaking– once vaunted as revolutionary – to the dustbin of Soviet super-inventions that were scrapped after millions of dollars and man-hours were invested in their realisation.

Russia’s state nuclear corporation Rosatom promised in May that the delay in the building the first floating nuclear power plant (FNPP) would last five months. They said that the new FNPP would be ready in 2011 instead of the initially projected date of 2010.

Rosatom specified that, at current, work on the FNPP’s steam turbine generators is 60 percent complete, the first reactor installation is 50 percent complete, the second reactor installation is 50 percent complete and the hull is 30 percent complete. The delay was explained by the necessity of additional project elaboration.

Sergei Novikov, a Rosatom spokesman, said in an interview with Bellona Web, advanced a new version of events.

“Concerning FNPPs, there are still questions about relations with contractors, who are not really meeting their work deadlines according to schedule. The main contractor, which is constructing the platform –the trough as they call it – is a Defence Ministry factory, and their priority is military orders, so we are not rushing them,” said Novikov.

Spokespeople for Sevmash refused to comment. However, others at the factory said privately that the work is grinding to a halt for financial reasons.

Where is the money for FNPPs getting spent?
Alexei Ovchinnikov, with the ETAS environmental organisation, didn’t rule out that that Sevmash could have put the funding for the FNPPs into other projects. He said that difficult financial circumstances at the factory have in the past hindered the completion of projects, and raised the cost of completing them.

Another ‘Gorshkov’ bath for Sevmash
“If we recall the history of Gorshkov, that Sevmash took upon itself, consciously knowing that it was not up to such a project – such a situation with FNPPs is entirely realistic,” said Ovchinnikov in reference to the colossal modernization project Sevmash undertook on the aircraft carrier Admiral Gorshkov, which belonged to the Indian Navy, after Russia sold it.

The Gorshkov project, begun in 2006, soon hit financial shoals when it became apparent that the calculations for the amount of work the vessel needed were inaccurate, and Sevmash asked for an additional $1 billion – $300 million more than the initial budget anticipated. The completion of the Gorshkov project was put off from 2008 to 2012.

“Sevmash is an enormous complex of factories,” said Ovchinnikov. “They make rubber, steel, blow glass, and it devours piles of money. They took on this project (the Gorshkov) at a difficult time and took the money to plug up budgetary holes.”

In May, the issue of “financial-economic recovery” at Sevmash was discussed at a government meeting. According to Kommersant, a Russia business daily, a programme to reorganise four ship building yards in Russia, including Sevmash, would demand an outlay of 150 billion roubles ($6.3 billion) from the federal budget and the Investment Fund.

What does a ‘floating Chernobyl’ cost?
The cost of building the Mikhail Lomonosov has tripled since 2004. While the FNPP was still on the engineering drawing board, the price was estimated at 5.9 billion roubles ($251 million). By 2006, that price had risen to 9.1 billion roubles ($387 million), and by May had climbed to 11.2 billion roubles ($476.5 million). In 2007, the government promised to earmark 2.6 million ($1.1 million) for FNPP construction.

The first FNPP in Russia is slated to power Severodvinsk, to cover the energy needs of Sevmash, which is located nearby. In April 2007, Russia’s reactor building monopoly Rosenergoatom and Sevmash signed a letter of intent under which six FNPPs would be built at Sevmash between 2008 and 2016. According the plan, the time for production of FNPPs beginning with the third mortgaged station would be reduced from four to three years. Despite Rosatom’s enthusiasm, the profitably of FNPPs is a highly debatable subject.

The nuclear industry insistently suggests the use of FNPPs in regions with poorly developed infrastructures, as well as for realising various industrial projects, requiring autonomous and uninterrupted energy supplies. However, neither Russia’s far northeaster Chukotka region, nor the Kamchatka peninsula, in the Pacific, for which FNPPs have been suggested, the stations are not needed. Neither region is experiencing an energy shortage, nor is one forecasted.

Kilowatt per kilowatt, costs are rising
German Gref, as Minister of Economic Development and Trade, has voiced doubts in the economic feasibility of FNPPs.

“The cost of one kilowatts of the established power of a floating nuclear power plant is $7,200. This will never pay for itself. This is seven times higher than thermal generation,” said Gref during a three-year government review of investment programmes in electric energy in Russia last August.

Sergei Krysov, the head of the Direction of FNPP Construction programme said in 2007 that a kilowatt of the established power of FNPPs will cost $4,000 per kilowatt.

The established cost of a kilowatt of established power by contemporary wind energy stations in Europe is less than $1000.

FNPPs and oil exploration – still on the table?
Another prospective client for FNPPs – Russian state gas monopoly Gazprom – recently contradicted information about the possible use of FNPPs for the development of continental shelf oil deposits. In a letter to the Murmansk environmental organisation Nature and Youth, Alexander Ishkov, head of Gazprom’s department of energy efficiency and ecology said that, “the use of floating nuclear power plants in conditions of drifting ice fields and high waves during storms have not been discussed.”

Though the letter left it ambiguous as to whether Gazprom would be discussing the possibility in the near future.

‘Insane’ to deliver to certain would-be clients
According to Rosatom, Pacific region countries are expressing an interest in FNPPs – particularly counties like India, Indonesia, Vietnam, the African nations of Mozambique and Namibia, as well as the United Arab Emirates.

The notion of delivering such installations to counties like Indonesia, said Bellona nuclear industry expert Igor Kudrik, “borders on insanity, if, of course, each station is not outfitted with a company of soldiers to guard against all manner of terrorists and insurgents.”

Environmentalists are nearly of the same opinion that FNPPs are dangerous based on the assumption that the reactors will produce radioactive waste, disposal of which will create especially complicated problems.

Vera Ponomareva wrote and reported from St.Petersburg, and Charles Digges translated and edited from Oslo.