Vladimir Putin went to Turkey for the groundbreaking of a $20 billion Akkuyu nuclear power plant to be built by Rosatom, Russia’s state nuclear corporation, a project that is only half financed after it hemorrhaged investors in February.
Watching by video link from Turkey’s sprawling 1,100 room presidential palace in Ankara, Putin and his autocratic Turkish counterpart, Recep Tayyip Erdogan, kicked off the construction of the plant in the Mediterranean coastal province of Mersin, as workers poured the first ceremonial batch of cement.
The project, which was agreed to in 2010 is expected to start generating power from its first reactor unit in 2023, with three more reactors coming online in 2025 to generate 1,200 watts of electricity, equal to 10 percent of Turkey’s energy needs.
But the plant has been beset by delays. The latest of these came in February when two Turkish groups, representing a 49 percent stake in the plant, backed out in February. Sources told Reuters they been put off the project by the size of the financing required as well as by concerns they will not receive a sufficient share of the lucrative construction side of the deal.
Rosatom’s head, Alexei Likhachev, has insisted that Rosatom is still in talks to secure other investors, but has said the sale of the stake in the plant likely won’t happen until 2019. It’s unclear by how long this search could delay the plant’s opening, or by how much the project’s price tag is likely to increase as a result. Reuters has reported Rosatom is having a difficult time finding anyone interested in investing in the plant, which Rosatom disputes.
Turkish energy analysts have likewise suggested that there’s not enough local knowledge to handle a nuclear power plant, and that Rosatom’s ownership of the plant would ensure its monopoly on that know-how.
And then there are the local politics. Thanks to Erdogan’s repressive rule, the media cannot be critical of the huge nuclear power undertaking, and corruption means that commercial bids to finish the plant will hardly be transparent.
Rosatom initially persuade Turkey to build the Akkuyu plant in the early 2000s, when Ankara signed a memorandum of understanding with Moscow. At the time, however, the projected returns on the energy it would produce were too low for Ankara to finance its half of the bargain.
Rosatom then proposed to build the plant at its own expense, a plan by which Russia would have constructed, operated and owned the Akkuyu plant. But a downturn in the Russian economy saw funding for that effort dry up.
Last year, the government in Ankara stepped back into the deal with a promise to drum up investment, and declared the nuclear power plant a “national priority.”
Still, those terms failed to appeal to two of its main investors – the Turkish firms Kolin and Kalyon – who have departed the venture. Some observers have suggested the next step for the hard-line regime in Ankara might be to just force investors to participate.
Rosatom is reportedly in talks with Cengiz Holdings, the one Turkish company that remained in the deal as the plant’s contractor, about attracting a single investor to make up the missing half of the needed funding.
Regardless of how that turns out, the shake commitment of investors marks yet more turbulence for Rosatom’s efforts to sell the AES-2006 – also known as the VVER-1200 reactor – to foreign customers.
In 2011, efforts to corral investors behind a VVER-1200 at Baltic Nuclear Power plant, which was slated for the Russian enclave of Kaliningrad, sputtered when investors from Poland fled the project. Further afield in South Africa, courts have stopped another multibillion dollar VVER-12000 project over allegations of corrupt dealings with the government in Johannesburg.
In neighboring Belarus, a VVER-1200 construction project has been skewered by the governments of Lithuania and Poland after a series of potentially catastrophic mishaps at its construction site. At one point, workers dropped the reactor’s 330-ton pressure vessel, and Rosatom was forced to replace it.
Ironically, the dropped vessel had initially been built for the defunct VVER-1200 project in Kaliningrad.In the end, Russia’s difficulty finding Turkish investors may be a blessing in disguise as the VVER-1200 has proved to be a dicey product – something Rosatom has worked to hush up.
After Russia’s very first VVER-1200 reactor went into service at the Novovoronezh nuclear plant, it was shut down for two and a half months after it short circuited. Rosatom kept the breakdown under wraps, but worried locals went to the press suggesting more was afoot than just a mechanical failure.
Rosatom was eventually forced to respond to the hysteria, but in doing so revealed that the prototype of the VVER-1200 contained a cooling system flaw. This prompted what Rosatom termed a series of “modernizations,” which it undertook at three other VVER-1200s it was building within Russia – one at the Leningrad Nuclear Power Plant, the one in Belarus, and at a second VVER-1200 under construction at Novovoronezh.
It’s still unclear whether these modernizations apply in Hungary, where Russia is building two VVER-1200s at the Paks II nuclear power plant – reactors financed by a €12 billion loan from Russian taxpayers.
Unless Rosatom finds other investors for Akkuyu, Russian taxpayers are likely to finance that VVER-1200 reactor as well. But given the reactor’s glitchy history, they won’t be the only ones feeling the sting of buyer’s remorse. The rest of the world will be suffering it too.