Czechs Signal Delay in $7 Billion Nuclear Reactor Project
Czech Premier Signals Delay in $7 Billion Nuclear Reactor Tender
(Bloomberg) -- Czech Prime Minister Andrej Babis said the country isn’t yet ready to start a tender for a new nuclear reactor, signaling a delay in the project that’s been a key concern for investors in power utility CEZ AS.
After years of negotiations, state-controlled CEZ and the government in July signed a contract effectively providing price guarantees and financing help. The largest traded utility in eastern Europe, whose shares have long suffered because of the project’s risks, planned to start the tender by the end of 2020.
Babis veered off the announced road-map late on Monday, telling public radio that the tender isn’t prepared yet and that the government shouldn’t decide on such an important investment 10 months before elections. He also said it could take about one-and-a-half years to secure European Union’s permission for the planned state aid.
“Under the agreement, we need an official government approval of the tender documentation,” CEZ spokesman Ladislav Kriz said by phone. “Without that, it’s not possible to launch the tender.”
Read more: $7 Billion Reactor Deal Can’t Shake CEZ Investors’ Concerns
The Czech Republic, a landlocked nation with limited options for wind turbines and solar panels, has made atomic power the key for moving away from coal plants and boosting energy security. Until this year, a string of governments wanted CEZ to shoulder the full cost of new reactors, weighing on the stock price, which has almost halved over the past decade.
The shares rose 0.5% to 477 koruna on Tuesday as of 12:26 p.m. in Prague, heading for its highest close in more than three months.
Under the agreed timetable, CEZ should pick the supplier by the end of 2022 and the construction should last from 2029 to 2036. The deal gives the utility the right to pull out of the project and hand it over to the state if it deems the conditions unprofitable or too risky.
CEZ estimates the 1,200 MW unit would cost about 6 billion euros ($7.1 billion) in today’s prices, more than a half of its market capitalization.
Postponing the government’s decision until after the parliamentary elections next fall could push back the rest of the timetable, according to Martin Cakl, an analyst at brokerage Patria Finance AS in Prague. He has a buy rating for CEZ, with a price target of 545 koruna.
“It’s hard to say whether a possible delay would be positive or negative for CEZ shares,” Cakl said. “Overall, investors find the project troubling.”
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