Analysts: Czech state should sign agreement with KHNP as soon as possible, but risks remain

After the preliminary injunction blocking the signing of an agreement to build new nuclear units was lifted, the state should not wait and should conclude a contract with South Korea’s KHNP as soon as possible. Analysts told ČTK. At the same time, however, they acknowledge that risks remain which could complicate the tender even after the agreement is signed.

The Supreme Administrative Court (NSS) today lifted the preliminary injunction banning the signing of a contract to build new units at Dukovany, following appeals on points of law filed by Elektrárna Dukovany II (EDU II) and KHNP. The injunction was issued in early May by the Regional Court in Brno, following a lawsuit by French company EDF, which challenged the competition authority’s decision that the nuclear tender had been conducted properly. The regional court will hear EDF’s lawsuit itself on 25 June.

Capitalinked.com analyst Radim Dohnal said it was good that the court had acted quickly and lifted the restrictive measure. The state, acting through Elektrárna Dukovany II, should now waste no time, avoid organising any huge press conference and proceed with signing the contract, Dohnal said.

XTB analyst Jiří Tyleček said he would take a similar approach in case any serious doubts emerged. He noted that the South Korean company had indicated its offer was valid only until the end of June, so he said it made sense to sign the contract by the end of this month.

Tyleček also described today’s NSS ruling as positive news for domestic energy security. “The Czech Republic needs new, high-capacity energy sources, which the new reactors will provide,” he noted.

Jaroslav Míl, former CEO of ČEZ and former government commissioner for nuclear energy, said on Czech Television today that government and ČEZ representatives should fly to Korea within tens of hours at the latest and negotiate the signing of the final agreement there. “There is no reason to wait any longer,” he stressed. Míl said they could not wait for the court’s ruling on EDF’s lawsuit challenging the tender process either, as the proceedings could drag on. “I don’t believe the court can decide within weeks. It will take months,” Míl noted. He said the agreement should not be delayed because of the European Commission either. “Otherwise, we wouldn’t be able to do anything. Other countries wouldn’t wait either; let’s stick to our position,” he added.

At the same time, analysts agreed that despite the court injunction being lifted and the possibility of a swift contract signing with KHNP, risks surrounding the nuclear tender remain. If the courts subsequently ruled in EDF’s favour when hearing its lawsuit, and the Dukovany contract had already been signed, the French company could be expected to seek compensation for damages. “Big things bring big worries,” Dohnal noted.

The government decided to build two nuclear reactors in July last year. It chose South Korea’s KHNP over French company EDF. The other bidder, Westinghouse, had already been eliminated from the competition. The construction of new nuclear units in the Czech Republic is expected to be the country’s largest-ever contract. At current prices, the cost of the currently preferred option of building two reactors at Dukovany is 407 billion korunas.