Alternatives & Analyses: NPP Belene – still mission impossible

Rosatom’s announcement provides a more accurate picture of the nature of commitments and the relevance of the media coverage on the signed memorandum of understanding (MoU) between Rosatom, Framatome, and General Electric.

Despite the verbal fireworks and the aplomb of Minister Petkova, which implies that this is almost a geopolitically balanced and agreed joint venture, blessed by the respective heads of state, the truth could hardly be farther.

The legal form of the consortium itself remains somewhat blurred in different jurisdictions, making it difficult to understand the implications of what has been agreed and signed, as there seems to be no mentioning of a legally binding consortium in the MoU. 

Instead, the general or loose definition of a consortium as an informal partnership of companies to achieve a specific business goal comes first.

There is little anticipation that the three companies will register a joint venture to implement the Belene NPP project – the so-called investors’ consortium as a separate legal entity provided by Bulgarian legislation.

From Rosatom’s press release, it becomes more apparent that the signed document is nothing more than a classic intent for partnership on a specific project. The strategic investor will befall upon Rosatom, the company that will participate, implement, and undertake commitments to the Bulgarian side. No one else.

In other words, the word from Moscow is that Rosatom will participate in the “tender” for the Belene NPP, which is not news.

General Electric and Framatome are partners – key, critical, and strategic, but partners who will be paid by Rosatom to supply some equipment and carry out some activities. Neither the American nor the French company will assume any part of the political, including geopolitical, financial, project, environmental, market, technological, or any other project associated risks. 

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These will be borne by Rosatom and to a more substantial degree by the ultimate project risk-taker – the Bulgarian state.

This was, is, and will be the case. 

Things had not moved an iota from the situation ten years ago when Rosatom first asserted its want to acquire a majority stake and finance the entire project.

Second, the media interpretation dipped in a PR concentrate creates a false perception of competition between one group of contenders – the tripartite ‘consortium’ and a new “strong” player, the Chinese company CNNC. 

There can be no such competition, nor will ever be. Rosatom does not have the financial resources to fund the project out of its purse, nor will it be able to borrow 10 billion euros needed to complete the NPP.

Once, because the primary sources of funding for Rosatom’s capital program abroad are Russian state budget funds, judging from recent publications, state subsidies, and loans to Rosatom fall short of the minimum levels of its capital program requirements for 2020. 

The second time, because the company does not have access to the international capital markets. Credits from the internal market are again conditional upon state guarantees. To expect that in 2020 the Russian state budget will write a blank cheque to Rosatom to fund and build NPP Belene is an utter delusion.

Furthermore – suffice it to look at Rosatom’s international projects program with nearly 30 reactors, mostly on BOT and BOOT type of contract. Without any exception, all projects are stalled or late or canceled due to a lack of funding. Rosatom has tried to pass on the commitment to finance on local authorities, without much success.

These hiccups are not a short-term or seasonal phenomenon, that will be resolved by itself, next year, or up until 2025 or 2030.

The Kremlin faces a mission impossible trying to pick what to save from these strategically important industries – be it the state-owned defense companies, mired in debt, including the aircraft companies around the Mikoyan and Sukhoi bureaus. The Kremlin faces identical conflicting options to pick between the indebted tank builders /Armata/, the rocket constructors /the space program /, and rescue funding missions to Rosneft or Gazprom.

The only credible source of funding for NPP Belene, at least in theory, remains the Chinese government loans via CNNC. However, it also faces seemingly insurmountable obstacles.

First, CNNC has nothing to do with the signed memorandum of understanding between Rosatom, General Electric, and Framatome. The Chinese nuclear major will hardly be satisfied with the role of cash bringer, as it targets the part of suppliers of equipment or construction services. The Chinese company is ready to pay for a share in the procurement and construction works, which will inevitably lead to a reshuffle and replacement of General Electric, Framatome, and a lesser extent, Rosatom.

The geopolitics behind American and Chinese companies cooperating on a nuclear facility in Bulgaria is a classic case of unrealistic assumptions leading to unrealistic expectations and, ultimately, to bad decisions.

In conclusion, nothing in the memorandum of understanding between Rosatom, Framatome, and GE makes me change my opinion over many years. The Belene NPP remains an impossible project. Just the tally of wholly and partially irrecoverable losses goes up one notch.

At this moment, they have already surpassed 3.3 billion levs.

All of the critical issues remained unresolved – the market justification, the state guarantees, the project management, investment, environmental, and insurance risk.

Ilian Vassilev

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