Nuclear Power Company looks to west for Bailout
New York Times, April 1999
By Matthew L. Wald
Washington -- The company that operates 29 nuclear power plants in
Russia, long unable to collect case for its electricity sales, is looking
for investments from Western governments or companies interested in
sharing control of the reactors.
The director general of the Russian Electric Power Company, touring
the United States with a group of Russian nuclear officials, said in
a recent interview that the enterprise is expected to run a deficit
of $60 million this year, $200 million next year and $400 million the
year after that.
The company lacks money to pay workers, perform
maintenance and repairs, inspect crucial pipes and even buy fuel, said
the official Sergei N. Ivanov. At times the plants have only two or
three days of fuel on hand, he said.
"To prevent possible catastrophes in the field of nuclear power, we
need to organize some kind of new international body that will supervise
the work of this network, not only from the point of view of technical
support, which is usual, but financial investment support," Mr. Ivanov
said. The international group, he said, would manage the investments
in the plants directly, rather than sending the funds through "well-known
Government thieves." Day-to-day operations would remain in Russian hands.
The prospects for such investments seem uncertain at best. The proposal
is another sign of the tremendous change in Russia, and in the nuclear
industry that, through most of the post-Soviet era, was tightly linked
to weapons production. While cash shortages are endemic throughout Russian
business and industry, nuclear power officials point to the obvious
fact that reactor problems in Russia could affect other nations. They
argue, therefore, that other nations, including the United States, should
help find solutions.
One anticipated difficulty is that Mr. Ivanov would
like to use some of the foreign investment money to complete three partly
built reactors -- one of which has the same design as the reactors at
the Chernobyl nuclear plant in Ukraine, scene of the 1986 explosion
and fire. Two others are similar to Westinghouse plants in the United
"They're in a state of intense desperation," said
Stephen Kotkin, director of Russian studies at Princeton University.
He met with Mr. Ivanov and other Russians when the delegation visited
a conference on the world economy last month at the Milken Institute,
a research organization in Santa Monica, Calif.
"They have some knowledge of market economies and
they have a fantasy that outsiders will invest," said Professor Kotkin.
"Equity interest, bonds -- they'll go for anything. Everything is negotiable."
"Without some help, though," Professor Kotkin said, "this is going
to blow." Clinton Administration officials said the effort seemed highly
preliminary. One Administration expert said the Russians have little
of the data they would need to interest Western investors -- including
estimates of their costs. They also lack clear prospects of selling
power to customers who can pay cash that, in turn, could be used to
repay loans or provide dividends on investments.
In addition, groups in the United States that usually oppose operation
of nuclear reactors in this country have argued that giving aid to improve
safety at Russian plants may only prolong the lives of those plants,
when it would be even safer to let the plants be closed. The idea of
spending Western money to build additional reactors in Russia, especially
a graphite-moderated model like the one that exploded at Chernobyl,
would be extremely unpopular with some groups.
The unfinished graphite reactor is at Kursk; there are unfinished water-moderated
reactors, similar in outline to American models, at Kalnin and Rostov.
A Russian delegation -- which includes the director of the company
that owns the non-nuclear generating stations and the transmission network
and the transmission network and the director of the agency that regulates
nuclear safety -- has been meeting with Government and private officials
in Los Angeles and New York.
The Russian problem, say members of the delegation and Americans who
have studied the Russian situation, is in part the structure of their
electric industry, which has many inefficient plants. But, on top of
that, only 30 percent to 40 percent of electric bills are paid in currency.
The rest is paid in barter goods, priced by the producer, often at unrealistically
The money goes to provincial utilities and to the United Energy System
of Russia, which owns the non-nuclear transmission lines. Unified Energy
spends much of the money on natural gas and coal to fuel its own plants,
because miners and drillers can demand money or export their product
to other countries that will pay in hard currency, American analysts
say. But the nuclear power company has no such leverage.
The nuclear power company receives only about 10 percent of its payments
in currency, said one American official. Another 60 percent or so is
barter, and some of the bills simply go unpaid. Mr. Ivanov confirmed
this. He said that industrial customers tend to offer whatever they
produce as payment -- steel, chemicals or manufactured goods -- and
that others, like hospitals and army bases, offer nothing at all.
One Clinton Administration official, speaking on the condition of anonymity,
said many of the Russian plants are approaching the end of their 30-year
design lives and show symptoms of age.
The Russian company would like to close nine of
its older reactors, but it says it has no money for decommissioning
them. It says its best prospect for earning that money is to build additional
reactors and sell the power.