As Russia’s nuclear power utility goes private, who will actually buy nuclear power stations?

Publish date: August 29, 2008

Written by: Vera Ponomareva

Translated by: Charles Digges

ST. PETERSBURG - With the transformation earlier this month of Russia’s state nuclear utility Rosenergoatom into the joint stock company Energoatom, Russia’s nuclear industry is hoping both to get government budget funding and attract investors.

Rosenergoatom runs all 10 of Russia’s nuclear power plants, which comprise 31 nuclear reactors.

According to a August 11th decree issued by the Federal Agency for the Management of State Property, the charter capital of the Energoatom concern is 318.3 billion roubles ($12.9 million). One hundred percent of the stock will be transferred to the government holding Atomenergoprom by the end of this year.

As spokespeople for the concern said, explaining the name change, “the change in name of the concern is tied to changes in federal legislation regulating the use of the word ‘Russia’ and names of companies that include it.”

Some 55 federal state unitary enterprises will be auctioned off within the framework of reforms within Russia’s nulear industry. Thirty eight of them have already been auctioned off. Prior to the reforms, Rosenergoatom was also considered a federal state unitary enterprise.

According to the head of Russia’s state nuclear corporation Rosatom, Sergei Kiriyenko, the reform “will allow Rosenergoatom to better compete in the future for electrical energy production programmes in our country.”

Energoatom has a long way to go before acquiring full financial independence, and will continue to receive state budget funding.

The cost of the allocation project, or federal target programme, for the development of the nuclear energy complex from 2007 through 2015 alone is 1471 trillion roubles ($598 trillion), according to Rosatom official figures. This money is planned for the building of 26 nuclear reactors. After 2016, however, reactors will no longer be built on state budget, but investment resources of the nuclear industry.  

For Energoatom to become profitable will not be easy. First, tariffs will have to be reviewed to include expenditures on transport and decommissioning of nuclear waste, environmentalists say.

In an effort to attract investment in nuclear power plant construction, Rosatom in 2006 signed a memorandum of cooperation with the aluminum holdings Rusal and Sual. Industry bureaucrats announced plans to build nuclear power plants in the Far Eastern Primorye Region, in the northern Murmansk Region and the central Saratov Region to supply energy to metallurgical factories.

The announcement was somewhat premature: no concrete contracts have yet been achieved.

In March, Russian gas giant Gazprom even wrote an official letter to the Nature and  Youth environmental group denying information about their plans to use floating nuclear power plants in the development of the Shtokman oil and gas condensate field in the White Sea.  

Privatising dainty little pieces
The nuclear industry assures that future stock in Energoatom and other enterprises will remain state property and that the goal of the reform is not privatisation, but the elevation of their enterprises’ effectiveness.

Nonetheless, many experts are coming to the conclusion that after corporatisation, the sale of nuclear enterprises into private hands will follow.
“From a judicial point of view, it would be sufficient for the president to issue a decree allowing the sale of nuclear power plants and other industries into private hands to achieve a change in ownership,” said Olga Krivonos, Bellona St. Petersburg’s legal advisor.

Privatisation of the nuclear industry could once and for all provide a vivid insight into the competitiveness of nuclear energy. But environmentalists are not nourishing any illusions about a wholesale transfer of the nuclear industry into the rough and tumble rules of the marketplace.

“A significant portion of the industry will remain unprofitable and we will continue to finance that from the state budget,” said Vladimir Slivyak, co-chair of the environmental group Ecodefence.

“Another portion will be acquired by Rosatom brass or their friends, and hidden in offshore accounts,” he said.

The corporatisation of Rosenergoatom has been in the talking stage since Alexander Rumyantsev was head of Russia’s Ministry of Atomic Energy, which dissolved in 2004 to become Rosatom. Later talk centered on corporatising the concern in 2006, but the corporatisation process, which was opposed by environmentalists, conspicuously dragged out.

In September 2005, Ecodefence succeeded in publicizing a bill on the corporatisation of Rosenergoatom. The bill allowed for using nuclear energy stations for loan, rent, trust management, and even uncompensated use.

The publication of the plans halted the bill, but, according to materials obtained by environmentalists, the current corporatisation will make the same pass off of nuclear power plants into private hands possible.

The current nuclear industry reform is being regulated by the federal privatisation laws, and a decree by the Federal Agency for Management of State Property

According to article 5 of the federal law “On the use of nuclear energy” nuclear installations “may be the property of Russian juridical entities, the list of which is approved by the Russian government.”   

Bellona lawyer Krovonos said that decisions about civilian property deals are taken in such a case with the participation of the state.

“Such is the requirement of the the law “On privatisation of state and municipal property” regulating the transformation of federal state unitary enterprises into joint stock companies,” she said.

Radiation safety
Slivyak said that the privatisation of nuclear power plants in Russia is dangerous because it could lead to weakened control over how radioactive materials are handled.

“Russia does not have  a law tried in practice that regulates issues of handling nuclear materials. Therefore, in conditions of privatisation, there is a possibility that dangerous substances will fall into the wrong hands,” he said.

The situation is complicated by the fact that the creation of the Rosatom state corporation gave it the right to license monitoring agencies to oversee its own activities. This authority is enshrined in the federal law “On the creation of the state corporation for nuclear energy, Rosatom.”
“Speaking factually, in many instances, Rosatom is no longer under the control of Rostekhnadzor (the Russian Federal Service for Ecological, Technical and Atomic Supervision),” the body that monitors nuclear facilities in Russia, said Krivonos.

But Rostekhnadzor said that it expects no changes in its mandate due to privatisation.

“It cannot be that the orgnasation that needs monitoring monitors itself,” said Rostekhnadzor spokesman Yevgeny Anyushin.

In May of this year, the president signed a decree creating the Atomenergoprom holding which will be comprised of all Russian nuclear fuel cycle enterprises from mining and enrichment to the building of nuclear power plants and energy production.

At that time, it was announced that before the unification of the state enterprises, they would be corporatised. Rosatom has said that the privatisation of the enterprises and the creation of the holding company will attract investment into the nuclear industry.