Sierra Club of Canada Media Release

BACKGROUNDER


Romania’s Cernavoda-2 Nuclear Reactor



Historical Background

In 1979, Canada’s export credit agency, the Export Development Corporation (EDC), provided a $1 billion (US) loan to Romania for construction of the Cernavoda nuclear station.[1] Canada’s state nuclear company, Atomic Energy of Canada Limited (AECL), cooperated with the forced labour construction of the plant by Romanian dictator Nicolae Ceaucescu. At the time, Ceaucescu had grandiose dreams of building five or more reactors, but these plans collapsed through technical incompetence and lack of funds. The huge financial strain of the nuclear program contributed to the collapse of the regime in 1989 when Ceaucescu was executed. A rescue plan by AECL and the Italian company Ansaldo came in 1991, including $370 million in further loans from the EDC, as well as additional Italian financing.[2] Cernavoda-1ended up costing an incredible $2.2 billion [3], and did not start up until April 1996, almost twenty years after negotiations were first started.

Cernavoda-2

During his May 1998 visit to Canada, former Romanian President Emil Constantinescu asked Prime Minister Chretien for a $1 billion loan for Cernavoda-2.[4] Constantinescu said that the Romania did not want to provide a 100% guarantee for any Canadian loan. In addition, Romania wanted a longer payback period and a four-year holiday before loan payments start.[5]

It is now known that it will cost about $750 million US, or over $1 billion CDN [6] to complete Cheranvoda-2. AECL has stated that Canada would finance only one-third of that ($250 million US , or $375 million Canadian).[7]

In March 2000, Patrick Lavelle, Chairman of the EDC Board of Directors, stated that “EDC is presently participating in interdepartmental meetings to determine whether Canada Account funds would be available in support of AECL’s contract and, if so, under what conditions such support would be extended.”[8]

Ansaldo has approached Mediocredito Central and SACE, the Italian export credit agency for financing[9], reportedly in the amount of $150 million Euros (about $210 million CDN). Romania has also made application to EURATOM for a $350 million US loan[10] (about $550 million CDN).

Large loans to Romania will undoubtedly carry a high risk. Because of its weak financial position and slow movement on market reforms, the International Monetary Fund (IMF) has in the past put constraints on Romania against taking large foreign loans, such as would be required to complete Cernavoda-2.[11]

Romania Does Not Need Additional Electricity

The proposal to proceed with Cernavoda-2 is absurd given the fact that Romania has a huge three fold surplus of generating capacity. In 1999, total installed capacity was 19,676 MW, [12] and peak demand in 1998 was only 6,000 MW.[13] Construction of the nuclear plant will cause dislocation of the existing system, and ultimately depends on electricity exports which are still unconfirmed and are dubious at best.

An EDC Canada Account Loan for C-2?

Canada’s state-owned export/import bank, the Export Development Corporation (EDC) has been approached by the government’s nuclear company, Atomic Energy of Canada Limited (AECL), to provide a loan to the Romanian nuclear company Nuclearelectrica. AECL has suggested that the loan would be for about $250 million US, or about $390 million CDN at today’s rates. The loan would likely be under the “Canada Account”. Under Section 23 of the Export Development Act, a Canada Account loan is not a normal commercial transaction. It requires the concurrence of the Ministers of both International Trade and Finance, and an acknowledgement that the deal is “in the national interest”. The monies are then provided by Canadian taxpayers from the Consolidated Revenue Fund, the main operating fund of the government. EDC has described Canada Account transactions as typically having “long lead times and a high degree of uncertainty” [14].


Endnotes



1. Export Development Corporation, News Release, NR 79-21, April 30, 1979.

2. Letter from D. Ward , EDC, to Dave Martin, Sierra Club of Canada, May 16, 2001.

3. Jennifer Wells, “Going Critical: Canada's Nuclear Misadventure in Romania”, The Globe & Mail Report on Business Magazine, June 1995, p. 38.

4. Ray Silver, “Romanians seek funds to finish Cernavoda; eye exporting power”, Nucleonics Week, May 28, 1998, p. 3.

5. Randall Palmer, “Italy offers to take Romanian nuclear power”, Reuters, May 25, 1998. See also: Geoffrey York, “Romania seeks reactor loan”, Globe and Mail, August 6, 1998, p. A12.

6. Mark Hibbs, “RENEL aims to finish Cernavoda-2 by 2000, but later date likely”, Nucleonics Week, July 4, 1996, pp. 11-12.

7. Mike Trickey, “Deal Close for CANDU”, Windsor Star, August 10, 2000, p. A11.

8. Letter from Patrick Lavelle, Chairman of the Board, Export Development Corporation, March 16, 2000.

9. Patrick Lavelle, ibid..

10. Ann MacLachlan, “Cernavoda-2 completion bolstered by Romanian government support”, Nucleonics Week, September 14, 2000, pp. 1, 10-11.

11. Ann MacLachlan, “AECL offers Romania financing to begin Cernavoda-2 completion”, Nucleonics Week, March 5, 1998, p. 3.

12. National Commission for Nuclear Activities Control (CNCAN), Romania Country Report, Tenth Plenary Meeting of the G-24 NUSAC Group, Bruxelles, March 25-26, 1999, p. 1.

13. Dan Floru, “Reorganization of RENEL”, International Market Insight, Central and Eastern Europe Business Information Center, October 7, 1998, p. 2.

14. Summary of the Report to the Treasury Board on EDC’s Canada Account Operations for the Fiscal Year 1997-1998, Export Development Corporation, p. 4.



December 2001