ANALYSIS: EBRD chief says Kyiv meets terms for loan on new nuclear reactors (11/25/01)

ANALYSIS

EBRD chief says Kyiv meets terms for loan on new nuclear reactors

by Ron Synovitz
RFE/RL Newsline

A key loan to Ukraine - part of a $1.5 billion package linked to the closure of the Chornobyl nuclear power plant - has advanced closer to final approval. The board of the European Bank for Reconstruction and Development (EBRD) is to vote next month to confirm the $215 million loan, which was tentatively approved a year ago on condition that Ukraine meet the four targets on nuclear safety and economic credibility.

Jean Lemierre, the president of the EBRD, said in London on November 7 that Ukraine has met the four conditions attached to the loan to help complete reactors at the Khmelnytskyi-2 and Rivne-4 nuclear plants, known collectively as K2R4, and he formally recommended that the EBRD's board of directors vote to confirm that loan.

Approval by the EBRD board also would help unlock funds totaling $1.5 billion from other lenders for the upgrading and completion of reactors at K2R4, so that Ukraine can replace energy production lost by the closure of the Chornobyl nuclear power plant last year. The first condition for EBRD financing was met a year ago when authorities in Ukraine permanently shut down the last active nuclear reactor at Chornobyl - the site, in 1986, of the world's worst civilian nuclear accident.

Another important step was reached in September when the International Monetary Fund resumed disbursements under a loan program known as the Extended Fund Facility.

EBRD spokesman Jeff Hiday told RFE/RL on November 8 that Mr. Lemierre's approval of Kyiv's progress on nuclear safety assurances is significant. "Another [important condition that Lemierre says has been met] is that a host of [nuclear] safety standards are put in place. And not only safety standards, but money to implement safety standards. And this is not only for these two reactors [at Khmelnytskyi and Rivne], but also for all 13 nuclear reactors that are operated in Ukraine," he said.

The safety assurances required by the EBRD include the issuance of a report by international nuclear regulators confirming that Ukrainian nuclear regulators have the necessary independence and resources to assure that nuclear plants in the country meet Western safety standards. The EBRD also required commitments from the G-7 leading industrial nations and from the European Commission to provide technical assistance.

Finally, financial commitments for the K2R4 project were required from the European Union's nuclear agency, Euroatom, along with several export credit agencies and Russia.

Mr. Hiday said prompt confirmation by the EBRD board next month could allow financing for the remainder of the $1.5 billion loan package to be completed by the end of this year. "I think [the EBRD loan and financing from others] is going to come together more or less simultaneously," Mr. Hiday said. "The G-7 also has to take a lead in arranging the financing. But it all needs to happen more or less at once. And, in fact, if we sign this deal next month in Kyiv, as we hope to, it would be not only us signing the deal but several of the other parties signing the deal at the same time. So we all have to move in concert."

But Mr. Hiday said the EBRD board's vote is not expected to be a long, drawn-out process. "[The board simply has] to give a confirmation that these four conditions have been met. But they don't have to go through the entire project again [as they did last year]," he said. "It's purely to agree that these technical conditions have been met."

Mr. Hiday explained that any loan agreement signed in Kyiv would contain a series of additional conditions that would have to be met before money is actually disbursed. "There are a lot of other conditions that relate to the money being disbursed. There are about 30 in total," he said. "They range from adoption of a privatization plan for [Ukrainian] energy distribution companies to the establishment of a decommissioning fund for the eventual decommissioning of other [nuclear power] plants. Also, they have to do with electricity sector reform, to get tariffs raised and more cash collected for electricity bills."

The G-7 countries and the European Commission signed a memorandum of understanding with Kyiv in 1995 on the closure of Chornobyl. The EBRD was asked at that time to play a role in possible financing for the completion of K2R4.

The EBRD also administers three international funds for the decommissioning of Soviet-designed nuclear reactors in Lithuania, Bulgaria and Slovakia.

Ron Synovitz is an RFE/RL correspondent.

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