S E C R E T SECTION 01 OF 02 SOFIA 000363
SENSITIVE
SIPDIS
FOR SPECIAL ENVOY FOR EURASIAN ENERGY RICHARD MORNINGSTAR
FOR USEU ENERGY OFFICER RICHARD FROST
FOR EUR/CE JENNIFER HOOVER
E.O. 12958: DECL: 07/01/2034
TAGS: ENRG IAEA PREL PGOV BU
SUBJECT: BULGARIA: BELENE NUCLEAR POWER PLANT: MORE
TROUBLES
REF: A. SOFIA 0069
¶B. SEPTEL
Classified By: Ambassador Nancy McEldowney for reasons 1.4
(b) and (d).
¶1. (S) SUMMARY: Bulgaria's highest profile energy project
-- the Belene Nuclear Power Plant (BNPP) is dogged by cost
overruns, financing woes, construction delays, and now
serious safety and quality assurance concerns. Belene may
end up costing Bulgaria more than money in the long run.
Despite the repeated objections by project experts, the
Bulgarian National Electric Company (NEC) is recklessly
pressing forward in order to announce the start of the
official "construction" phase of the NPP, and to secure
funding from international investors. Belene project experts
have privately expressed serious concerns that if
construction continues on its current path -- ignoring safety
and quality assurance -- it could pose a huge risk. END
SUMMARY.
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SAFETY AND QUALITY IGNORED
---------------------------
¶2. (S) Marred by many technical, political, and financial
problems, the Belene NPP project continues to move forward
despite strong warnings about project safety and quality by
project experts. NEC, which controls 51 percent of the
project along with strategic investor Germany's RWE with 49
percent, keeps pressing to start the "Site Preparation Phase"
in September 2009 even before the "Demolition Phase" is
completed in August 2009. (Demolition Phase includes the
destruction and removal of the existing old site
infrastructure.) According to project insiders, NEC and its
on-site construction manager, ignore environmental, safety,
and quality assurance concerns and illegally canceled several
"stop work orders" issued at the site because of safety
violations.
¶3. (S) Pressed to meet its own self-imposed deadlines, NEC
grew increasingly frustrated with its site
architect-engineers and their repeated calls to follow
international quality assurance standards, their opposition
to the "overnight creation" of temporary structures, and the
lack of a Quality Assurance (QA) Program Plan for the
temporary structures. (Construction of temporary structures
during the "Demolition Phase" and "Site Preparation Phase" is
a routine process and facilitates the storage of equipment
and manufacturing of key construction components such as
concrete). As a result, NEC permanently modified its
contract with the architect-engineers and removed their
responsibility to issue construction permits for on-site
temporary structures. Instead, NEC asked the Bulgarian
Ministry of Regional Development and Public Works (RDPW) to
issue the approvals - which they subsequently do without
oversight or proper technical documentation. Belene project
experts stated that this was a violation of international
nuclear industry best practices, because the
architect-engineering company could no longer validate the
quality or performance of the on-site temporary structures.
¶4. (S) Another problem area is the lack of an overall
detailed technical and quality assurance plan for BNPP. As
of late June 2009, Russia's Atomstroyexport (ASE) -- Belene
NPP's main foreign contractor -- has yet to provide NEC with
an overall Quality Assurance (QA) Program Plan. A QA Program
Plan is required before the Technical Design Approval Order
(TDAO) can be issued and certainly well before the Bulgarian
Nuclear Regulatory Agency (NRA) can issue a Construction
Permit for BNPP, making the targeted start dates of September
2009 and December 2010 virtually impossible.
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LESS THAN A GLOWING ENDORSEMENT
-------------------------------
¶5. (S) NEC is rushing to complete the "Demolition Phase"
and start the "Site Preparation Phase" to make Belene look
financially viable, attract additional international funding,
SOFIA 00000363 002 OF 002
and keep RWE as a strategic investor. Our contacts told us
RWE will not provide funding until "financial closure" and it
sees the "first concrete poured," which is currently
estimated for December 2010. According to our contacts,
"Site Preparation" activities will be called "Construction"
in the media to make it appear that the project is
progressing ahead without any problems. With the
"Demolition" slated for completion in August 2009, NEC plans
to begin "Site Preparation" in September 2009, despite the
numerous environmental, safety, and quality assurance
objections raised. Interestingly, ASE Vice President Genady
Tepkyan publicly stated on June 20, that ASE will start
"construction" of Belene NPP in September 2009.
¶6. (S) RWE is clearly feeling "buyer's remorse" about its
participation in Belene. Bulgaria's leading energy
journalist Galina Alexandrova (strictly protect) told us in
February that RWE worries about Belene's lack of transparency
and working with ASE and Bulgarian subcontractors. Belene
experts said that RWE remains "in the dark" on most on-site
day-to-day and technical issues. During a late May 2009
Belene project meeting, RWE asked numerous basic questions,
indicating that they have not seen any of the on-site safety
and environmental reports. On more than one occasion NEC
prevented their contractors and subcontractors from speaking
directly with RWE experts, often reminding them of their
confidentiality agreements when they tried to answer RWE's
questions. There is speculation that NEC is trying to keep
RWE from abandoning the project by "glossing" over serious
technical and safety concerns for the sake of moving the
project forward. Media reports theorize that RWE is trying to
pull out of Belene. Some contacts suggest that RWE will wait
until after the Bulgarian (July 5) and German (September)
elections before announcing the fate of its future
participation in BNPP, as GERB officials have expressed
strong negative views toward the project.
¶7. (S) The current BSP-led government has repeatedly pushed
for Belene, especially with 700 million euros in sunk costs
and priceless political capital invested in the project. The
Bulgarians and RWE initially wanted commercial financing for
the entire project, but were unable to attract funding from
Western banks -- wary of extending a large loan to an
increasingly questionable project in the midst of the global
financial crisis. In early June, Bulgarian Energy Holding
(BEH) CEO Galina Tosheva confirmed Russian approval for a 3.8
billion EUR (5.4 billion USD) loan for Belene. The
Bulgarians are still in the dark on actual details. Tosheva
told us that she expects Russian PM Putin will dictate the
loans terms directly to Bulgarian PM Stanishev.
¶8. (S) COMMENT: Vested interests -- the current BSP-led
government, NEC, well-connected politicians, Bulgarian energy
oligarchs, and Russian investors -- keep pushing the project
at all costs. NEC has ignored repeated warnings on safety
and quality assurance from Belene project experts and
international nuclear industry best practices. Since BNPP
began, the corresponding technical documentation, the ongoing
demolition, and site preparation activities have not been
investigated, audited, or approved by the International
Atomic Energy Association (IAEA). Bisser Boev, a member of
GERB's economic team, told us that as of late June, Belene
also has no updated economic or technical feasibility study.
We should encourage the next government to quickly begin its
due-diligence on the project; stressing the importance of
meeting all international safety and quality assurance
standards, and bringing in the IAEA and the EU's European
Atomic Energy Community (EURATOM) to perform an on-site
inspection. END COMMENT.
McEldowney