Few events in political or economic history have an impact that lasts for decades. And even fewer economic endeavors have similar potential and impact. But without a doubt, the construction of nuclear power plants could be one among them. Apart from purely economic reasons - the new 7th and 8th units in the Kozloduy nuclear power plant will cost tens of billions of levs and investment in nuclear power is a project that takes a century at least.
In the 1970s, Bulgaria made a move with Soviet cooperation, and the economic dependence continues to this day - building the first six units in Kozloduy. Now a similar step is being taken with US support, more specifically with American company Westinghouse, which is persistently trying to penetrate Eastern Europe as an alternative to nuclear giant Rosatom.
But such a large-scale investment has its pitfalls - negotiating an agreement with Westinghouse, choosing a builder, consultants, etc is a hard task.
The issue of costs is also a key issue on which the selling price of electricity will then depend. At the Energy Summit 2024 organized by Kapital, serious requests were made that the project should not just be started, but also completed, as it enjoys wide political support. At least those were the remarks of two of the forum's guests - the executive director of Kozloduy NPP Valentin Nikolov and the director of the project in Bulgaria from Westinghouse, Oscar Pratt. Pratt himself was sent to Bulgaria for this very reason - he is the American company's representative who completes its projects in China and the USA.
Against the background of all this, a decision was adopted in parliament awarding the EPC contract to one specific company - the Korean Hyundai. This has triggered political tensions that could disrupt the project's otherwise smooth path so far. The vote passed with only 1 vote, without the support of PP-DB and with a reduced quorum due to the departure of three MP's from Vazrazhdane.
WCC-DB submitted a counter-proposal, according to which parliament obliges the new company NPP Kozloduy Novi Moshnosti to negotiate also with another company - the American Bechtel, but parliament was firmly behind the Hyundai proposal. This gave rise to questions about pre-made agreements and potential corruption.
At a meeting of the Council of Ministers on February 12, Energy Minister Rumen Radev and Assistant Secretary at the US Department of Energy Andrew White concluded an intergovernmental cooperation agreement on the project to build a new nuclear power plant at the Kozloduy NPP site. This moment was extremely important because it was the last diplomatic step before the actual process of starting the plant's construction.
Not so easy a task
The agreement undoubtedly also has a strong political nuance, which positions Bulgaria as a partner of the USA not only in the field of security, but also in energy, which has always been dominated by Russia.
The big topic of costs still has no concrete answer, although for the first time there is a real commitment as to how much Bulgaria is ready to give. The subject is particularly sensitive in view of the constant delays of nuclear projects worldwide and their rising costs. The colossal sums and the need for wide-ranging financing can also reach the Bulgarian project, especially since Westinghouse is designing several more in Europe and none of them are working yet.
Minister Radev announced that the red line for the Bulgarian side in terms of price is 14 billion dollars, or 25.4 billion levs for the two reactors. However, this could be a rather conservative framework, since the investment in Belene 7-8 years ago was estimated at 10 billion euros, and inflation in the sector alone is huge. It seems far more realistic that the bill will turn out to top 20 billion dollars.
According to the tender description, the plan is for the project, at least for the 7th block, to be implemented by 2035, but this is quite optimistic. If implemented, this means that in 10 years the country will have a new nuclear unit, which will work together with the 5th and 6th units of the Kozloduy NPP, whose life is until 2050. Most likely, the two new units in Kozloduy will be built almost in parallel, with the idea being that the second one will be launched 2-3 years after the first one.
The total capacity of the two new AP1000 American technology units in Kozloduy will be about 2,220 megawatts, which will slightly exceed the capacity of the current two Russian reactors at the plant.
The need for new nuclear capacity is motivated precisely by the fact that those operating now can operate until 2050. And nuclear electricity is already considered part of the EU's green mix and contracts for difference and in some cases maybe PPAs contracts.
However, the rising costs of nuclear power plants due to their large-scale and environmental considerations should not be underestimated. The much cheaper renewable energy projects that are being implemented in Europe and Bulgaria are rapidly changing the energy landscape and it may turn out that after 10-15 years the energy from the new nuclear power is too much, too expensive and difficult to manage given that electricity markets are going to be in more need of flexible plants that do not only provide baseload output.
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QnA with Oscar Pratt, Westinghouse's Bulgarian project director
When we speak of building the plant, can you explain what Westinghouse will be doing and what the EPC constructor will be doing?
Westinghouse's role is in the engineering and procurement of the nuclear and turbine island at the site. It is also up to us to support the owner and builder. The task of the constructor is the same as ours, except for the balance of the plant. They will supply all the remaining equipment, including even cement and cables throughout all three phases of construction. There is no doubt that we will have to work with any of them, and I can say that we are ready to cooperate with the chosen company.
Considering the other major nuclear projects in Europe (such as in the UK and Finland), do you think the investment environment here makes it difficult to meet deadlines, and how do you ensure that the project is on schedule?
Westinghouse will work with Bulgaria to complete the project. It's about project management, licensing, engineering, construction, commissioning and even fuel and aftermarket maintenance. All these things will be included in the contracts between Bulgaria and us and with the builder.
The investment decision was made on the basis of a structured plan of the company and I am sure that it will come to a happy conclusion.
Does Westinghouse plan other investments in Bulgaria? Is there a place for concern about the fuel replacement that will happen shortly considering recent practices in Europe?
The AP-1000 units are a mega project that will take many years and will also depend on the talent we can tap locally. The whole supply chain that will happen in the country is extremely important. From an investment perspective, we are analyzing the environment and I am sure there are many opportunities.
Given the conversations I've had with people from the fuel department at the company, I dare say that everything is going smoothly in Eastern Europe. Everything is going according to plan and as far as I know there is nothing to worry about.
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Valentin Nikolov, CEO of Kozloduy NPP
What is really happening with the new reactors of the Kozloduy NPP and what is the difference between this project and the Belene one which failed?
At the moment, the first steps are financially secured, the company has more than 1.5 billion levs cash available for operational expenses.Very soon the FEED will be completed, and then the engineering itself will begin - this will all be paid for and will give confidence that the project is going to happen.
I think we have the support of both the people and the politicians - especially from parliament. You see that Oscar Pratt, who has completed several projects, was appointed to work by Westinghouse in Bulgaria, and I think that he was not sent to Bulgaria by accident.
But 1.5 billion levs is insignificant compared to the entire amount needed for a project. A final price tag of $14 billion was dropped. How do you plan to structure the project?
The structure will be 30% shareholder equity and 70% external equity. At the moment, a procedure is underway and we will expect, if possible, that the builder/designer himself will offer financing. The injection of capital along these lines can be negotiated.
Contracts will be prepared on a turnkey basis to avoid cost overruns.
Will a Hyundai company be a constructor?
We do not just choose a builder, but a Westinghouse partner. Bulgaria will find it difficult to manage two contracts separately. And the company should become a partner with Westinghouse. Out of all 5 candidates - two were Chinese and the companies Bechtel and Fluor took part in the tender with subsidiaries. Our idea was to generally test whether international companies would participate in such a project.
This week you announced an environmental assessment procedure for the 8th block. Will the two projects move in parallel?
Yes, this is to keep the price down. There are universal systems and it will be more cost effective to build them in parallel. But, in addition, Bulgaria needs this electrical energy. The new Westinghouse reactors are much more maneuverable than the old ones now operating. This maneuverability was seen in China during the 2020 lockdowns when the AP-1000 units had to maneuver their power. In the summer in Bulgaria, consumption drops. But it is important not to talk only about the Bulgarian market, because nowadays it is about the regional market and the European market in general.
Few events in political or economic history have an impact that lasts for decades. And even fewer economic endeavors have similar potential and impact. But without a doubt, the construction of nuclear power plants could be one among them. Apart from purely economic reasons - the new 7th and 8th units in the Kozloduy nuclear power plant will cost tens of billions of levs and investment in nuclear power is a project that takes a century at least.
In the 1970s, Bulgaria made a move with Soviet cooperation, and the economic dependence continues to this day - building the first six units in Kozloduy. Now a similar step is being taken with US support, more specifically with American company Westinghouse, which is persistently trying to penetrate Eastern Europe as an alternative to nuclear giant Rosatom.
