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Cablegate: Romania: Nuclear Power Sector On the Rise

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PP RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
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DE RUEHBM #0997/01 3541600
ZNR UUUUU ZZH
P 191600Z DEC 08
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 9049
RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUEHUNV/USMISSION UNVIE VIENNA PRIORITY 0062

UNCLAS SECTION 01 OF 03 BUCHAREST 000997

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ALSO FOR EUR/CE ASCHIEBE AND T MHUMPHREY
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SIPDIS

E.O. 12958: N/A
TAGS: ENRG ECON TRGY BEXP BTIO SENV EPET KSEI RO
SUBJECT: ROMANIA: NUCLEAR POWER SECTOR ON THE RISE

REF: A) State 127468, B) Bucharest 595

SUMMARY

1. Nuclear power accounts for an increasing share of Romania's
electricity production. The country's two operating reactors at the
Cernavoda Nuclear Power Plant currently provide 18 percent of
Romania's domestic electricity production, with this number
scheduled to double after two additional reactors planned for the
same site are completed. When combined with Romania's large
hydroelectric power base, more than half of Romania's current
electrical power generation is carbon-free. The Government of
Romania (GOR) plans to expand the use of nuclear power in order to
meet increasingly aggressive EU carbon emissions targets. Romania
is largely able to operate and fuel its nuclear reactors without
outside assistance, but will use foreign companies to provide a
secondary source of nuclear fuel and to design and supervise the
construction of new reactors. This report responds to Department's
ref A request for information about the nuclear power sector. END
SUMMARY.

NUCLEAR GENERATION TODAY

2. Romania has been operating nuclear reactors for power generation
since December 1996, when the first reactor at the Cernavoda nuclear
power plant came on line. The Cernavoda site, located on the Danube
River 150 km east of Bucharest, was initially conceived by the
former communist regime as the location for up to five nuclear
reactors, of which four will ultimately be built. A Canadian
design, the Canada Deuterium Uranium (CANDU-6) pressurized heavy
water reactor (PHWR) using natural uranium, was selected for use in
the power complex. Reactor 1 was built in cooperation with Atomic
Energy of Canada Ltd. (AECL) and Ansaldo (a company of the Italian
Finmeccanica Group). General Electric (GE) provided the turbine,
the generator, and the fuel loading machines.

3. Romania's second nuclear reactor at Cernavoda began operations
on May 6, 2007, and was fully connected to the power grid on October
1, 2007. The second unit is also a PHWR CANDU reactor, built by the
same joint venture between AECL and Ansaldo, with GE providing
additional components. Today both reactors are operating at full
capacity with reliability records placing them in the top tier of
CANDU operators. On a recent visit to Cernavoda, EconOff met both
the professional managers and the competent technical staff working
for the state-owned nuclear power company, Nuclearelectrica. While
only a few expatriates are currently employed by Nuclearelectrica,
additional foreign consultants and project managers will be needed
to assist in the construction of reactors 3 and 4. Many of the
employees have benefited from foreign training, mostly in the U.S.
or Canada. The company is able to provide sufficient salary and
benefits to attract and retain a high quality workforce
domestically.

4. With two reactors now on line, the operating efficiency of the
complex has improved, helping to ensure baseload stability on the
Romanian electrical grid. Following commissioning of the second
reactor, Nuclearelectrica became the second-biggest electric power
provider in Romania (hydroelectric producer Hidroelectrica is
bigger), with nuclear power covering 18 percent of Romania's
domestic electricity consumption. Nuclearelectrica has been a
profitable contributor to the state budget, earning the equivalent
of 37 million USD in the first half of 2008.

WHY NUCLEAR POWER?

5. The GOR decided in 2007 to construct two additional reactors in
Cernavoda, in part to help Romania meet aggressive EU climate change
targets. This project, designed as a public-private partnership,
has been subject to lengthy delays, with the GOR making a
last-minute decision (only after accepting bids for the project) to
increase the government's stake in the consortium to 51 percent. A
lengthy negotiating process finally resulted in an agreement on
November 20, 2008 between the Government and the six private
companies involved. The new agreement puts Nuclearelectrica firmly
in charge, with a 51 percent stake, while Czech CEZ, French GDF
SUEZ, Italian Enel and German RWE each hold 9.15 percent. The
remaining shares, of 6.2 percent each, belong to Spanish Iberdola
and the Romanian division of Arcelor-Mittal. The 4 billion euro
project is scheduled to be completed in 2015, with Nuclearelectrica
contributing the government's share through loans, retained earnings
and in-kind contributions. Each of the two new units will be able
to produce 720 MW of electricity. The 1500 RPM turbine, to be
delivered by GE, will be among the biggest steam turbines ever
built.

6. Romanian policymakers clearly see nuclear energy as a source of

BUCHAREST 00000997 002 OF 003


energy security for Romania. Even as plans are just being finalized
for reactors three and four, the GOR has already floated the idea of
building additional reactors elsewhere in Romania, probably in
Transylvania (a feasibility study is planned for summer 2009). This
proposed facility would be completed after 2020, host between two
and four reactors, and have a total output of up to 2,400 MW.

7. Nuclear energy is attractive, in part, thanks to Romania's
ability to generate nuclear fuel domestically. Using a research
reactor operating near Pitesti and locally mined uranium ore, the
GOR is able to produce up to 10,000 fuel bundles each year, enough
to supply both existing Cernavoda reactors (reftel B). After use,
the radioactive assemblies are stored in a 49,250 rod capacity
cooling pond at the Cernavoda site. Once cooled, low- and
medium-level radioactive waste is usually moved to a permanent,
21,000-drum capacity storage facility located inside of a retired
uranium mine in Baita Bihor. High-level waste is being kept on site
in a temporary storage facility until the permanent high-level waste
repository being built in Saligny, near Cernavoda, is completed in
2014.

8. With Romania holding enough natural uranium deposits to last for
30 to 50 years at current usage levels, as well as possessing a
domestically-designed heavy water plant and a large-capacity,
temporary radioactive waste storage facility, nuclear power
production here is largely a domestic affair. While additional
reactors will most likely outpace the GOR's ability to mine and
manufacture sufficient quantities of nuclear fuel, the GOR would
prefer importing nuclear fuel from western suppliers to generating
electricity through increased natural gas imports from Russia. Post
fully expects that any new reactors built in Romania will be of a
western design.

9. A secondary interest in nuclear power stems from efforts to meet
EU climate change targets. With four reactors, nuclear power
production will provide nearly a third of Romania's growing
electricity demand. Coupled with the existing hydroelectric
capacity, which accounts for almost a third of power production,
Romania is well on the path to meeting increasingly aggressive
carbon reduction targets. This large and expanding carbon-free
production base opens the door to future electricity exports to the
rest of the EU.

GOVERNMENT ACTORS

10. While Cernavoda is managed by Nuclearelectrica, other entities
play leading roles in Romania's nuclear sector. Inspections and
enforcement are the responsibility of the National Commission for
Nuclear Activities Control (CNCAN), an independent nuclear regulator
directly subordinated to the Prime Minister. CNCAN also enforces
the nuclear liability law, which makes the operator exclusively
responsible for a nuclear accident, and verifies that nuclear
operators are sufficiently indemnified against potential losses.
The Nuclear Agency, under the Ministry of Economy and Finance, sets
the overall policy direction for the GOR with regard to nuclear
power. Other smaller players assist with nuclear research and
manage radioactive waste disposal.

TRADE OUTLOOK

11. The expansion of the nuclear industry in Romania is likely to
generate new business opportunities for U.S. companies in the areas
of: engineering design, construction and project management, supply
of specialized equipment (turbines, valves, gauges, control
equipment, safety and detection systems), waste management,
security, and safety. Among the American companies with appropriate
expertise and technology that have expressed interest in the
Romanian market are American Ecology Corporation, Babcock and
Wilcox, Bechtel Nuclear, CH2M Hill, Crane Nuclear, GE, Shaw Group,
and URS Corporation.

COMMENT

12. Romania has a developed nuclear power base which it will
continue to expand. Energy security concerns, climate change
targets, and rising demand all argue for an increased focus on
building new nuclear power plants. The GOR is able to manage
operations and run reactors using domestic labor and expertise.
However, there is no indigenous company with the capability to
design and supervise the construction of world-class reactors,
meaning that the GOR will continue to form partnerships with foreign
firms, such as that for reactors 3 and 4, if it hopes to build
additional plants. While there is a long history of cooperation
with Canadian nuclear experts, the GOR would be open to any western
technology, preferring to avoid deeper nuclear energy ties to
Russia. As Russia is the sole supplier of imported natural gas and

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a major oil supplier, further dependence on Russia in the nuclear
sector would do nothing to advance Romania's energy security goals.
End Comment.

GUTHRIE-CORN

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