April 1999

Russian Nuclear Power Company looks to west for Bailout

New York Times, April 1999
By Matthew L. Wald

[Posted 12/04/1999]

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 States.

"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 high values.

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.

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