(Note: Supporting information for this presentation can be downloaded from a Powerpoint file [3 M].)

I will provide a brief overview of the Shelter project strategy, which came out of the two planning activities that we've been through; a status of where we were about this time last year; then an update on what we've done during 1997--both in the international program as well as in the U.S. bilaterally funded activity; and then I'll describe the path forward from where we are now.

The project is the fixing of the Chornobyl Shelter or replacement of the Shelter and making it a safer facility for the longer term.

The United States has been involved in the project to assist in the international effort to convert the Shelter into an environmentally safe condition. That means that it will be contained--that there is a reasonable risk associated with the possible recontamination and also that the material be kept environmentally--critically safe--and that it's a safe place for the workers to work in.

The basis for the international involvement in the program was the Memorandum of Understanding agreed to with Ukraine by the G-7 in December 1995. This had a number of features: improvement of the safety of the reactors, generally in Ukraine, repair of the Shelter, help with economic recovery efforts, and other issues, including the financing of other reactors that were still to be completed, to replace thereactors that were closed down at Chornobyl. The ultimate, final closure of the reactors is supposed to be by the year 2000, and we're proceeding on the assumption that's what will be done.

The approach has been to provide, first, operational safety improvements. The United States became involved in the work very early-on, roughly in the same timeframe as the start of the international project. We developed a program that was focused entirely on making it a safer place for the workers to work. And this was done with the knowledge that the international project was going to be some time in the making and that things needed to be done quickly to make it a safer place.

We simultaneously began supporting the international program. Both activities started in the April/May timeframe in 1996. The European Commission (EC) project began initially without direct U.S. involvement, although we were involved as a monitor and were attending the meetings.

In August 1996 we received approval for technical involvement in the project, and that's when the U.S. contractor team got very actively involved. We've been very careful at every step of the program to not duplicate or in any way preempt the international project. So the efforts in the U.S. program have been focused on improving worker safety.

The four basic elements of the worker safety program are dose reduction (improvement of radiation safety), nuclear criticality safety improvements; dust suppression; and industrial safety.

We began with a visit of a team of contractors in May 1996 to Ukraine, and we accumulated a list of materials and equipment needed to improve the safety of Shelter operations. We developed a list of over $18 million worth of equipment. In collaboration with the Ukrainians, we prioritized the list and selected the highest priority items. We then reached agreements with the Ukrainian Shelter Operations group on specifically what we would buy and we started identifying, specifying, and procuring the equipment.

Simultaneously, the first activity on the international program side was the short- and long-term measures study. This was initially started as a project funded primarily by the EC. The U.S. joined the project in August. The project report was completed basically at middle of October. It was approved by a meeting in the Ukraine with the G-7 in November as the basis, as the strategy for proceeding. It was not a plan; it was a strategy. And that was accepted in principal but it was recognized that the report was just a strategy, it was not a plan, and that it needed more detail--technical detail, a more explicit definition of the logic, a more explicit definition of the costs and the schedule that they required.

The next step was the initiation of the Shelter Implementation Plan. We had our initial meetings in February 1997. It was a joint U.S.-EC project with a coordinator from both sides. I was the coordinator for the U.S. team; Norbert Molitor, who had been the project manager for the EC, remained as the project manager/administrator.

The original draft of the report was due on March 31. We met that date. Ultimately it was approved. It provided the necessary information on cost, schedule, budget, and also a definition of Early Biddable Projects that were the basis for expediting the project.

In the U.S. bilateral project, $5.9 million were allocated for dose reduction. By the end of 1997, about 40 percent of the equipment had been delivered, and the rest of it was in purchasing. Included were dosimetry equipment, some whole-body counting equipment, software to manage the data from the dosimetry, and training.

The dust suppression activity started out with a fairly ambitious intent but it was reduced somewhat in the planning process. It includes airless sprayers for reducing dust during an operational activity in the Shelter and also some equipment for decontamination. Approximately $400,000 is allocated to that effort, and about half of it is actually in place.

Approximately $1.3 million are allocated to nuclear criticality safety improvements. The equipment consists of eight separate pods, detector systems that include two different kinds of neutron sensors: temperature and humidity sensors. The systems are in Ukraine, and installation is expected to start during the next couple of months. The systems will be placed in the Shelter near areas of most concern over the possibility of recriticality.

Industrial safety is a collection of a different kinds of equipment to help improve worker safety on an industrial basis. We have delivered equipment for drilling and sawing concrete to obtain access to areas within the Shelter. We also have provided improvements in the electrical, ventilation, and access equipment.

Another key activity begun during 1997 came about after the Chornobyl Unit 3 and 4 ventilation stack was identified as an area of primary vulnerability. The stack was damaged severely during the accident in 1986. It's been recognized for some time that there was damage but it was really only recently appreciated the degree of the damage and the degree to which that threatened the Shelter as well as perhaps the plan itself.

It was agreed that this was something that was sufficiently urgent; that it needed to be done immediately; that it should not wait for the completion of the Shelter Implementation Plan and the projects. So in a meeting last summer it was agreed that we would proceed on a trilateral basis to get this work done.

Ukraine, Canada, and the United States have agreed to fund the project at a total level of $2.25 million. Ukraine will contribute $450,000, Canada $0.8 million, and the United States $1 million. This work has been approved, and detailed project plans are being developed. Procurements necessary to do the work have been initiated.

We had hoped initially that we might be able to begin the physical work this fall, but because of the pace at which things typically proceed, we were unable to do that. Instead, the work will begin in the spring, as soon as Ukraine's weather allows--April or May. It probably will be completed in a couple of months.

The repairs to be done are replacement of some of the struts and then reinforcement of some of the foundations that hold it on the roof.

The international project to develop the Shelter Implementation Plan (SIP) began about the first of February. The original schedule called for a draft by the end of March, which we met. The Shelter Implementation Plan was approved in May by both the G-7 and Ukraine and confirmed in June.

The document provides a plan for stabilization of the existing Shelter to the degree that's necessary to make it a safer place to work: the establishment of the monitoring equipment, and other measures necessary to ensure a reasonable level of risk relative to the possibility of recriticality; an emergency measure for the reduction of the possibility of a collapse; reduction of risk in the case of a collapse, including a spray system and an emergency plan; development of a plan for future management of the nuclear fuel still in the reactor; and also the development of a plan for a final safe confinement. Safe confinement being that the baseline was that we will remove the unstable parts of the current Shelter, stabilize the parts that are left to remain, and then replace it with a new Shelter. The Ukrainian position is that we can stabilize the existing Shelter. That was not ruled out, but the baseline for the plan was to replace it.

The pledging process started with a conference in Denver in June 1997. The G-7 pledged $300 million. The Ukrainian government has pledged $50 million, which would be applicable to the completion of work described in the SIP. Ukraine also has pledged $100 million for other activities that are directly supporting but not specifically part of the SIP.

The second international donors' conference in November in New York raised an additional $37 million. The total currently pledged for the SIP is $387 million. The total estimated in the SIP for the project is $760 million. But everybody in the conference agreed that the money in hand was sufficient to initiate the project.

The European Bank for Reconstruction and Development will manage the work, will establish a program management unit, and pay the bills. The SIP itself is a logic-based program. A series of key decisions will develop through the project, forming the basis at each step for determining the key measures that will need to be taken.

The Early Biddable Projects are parts of the 22 activities identified in the SIP that were needed for optimizing the designs, for reaching the decisions, and for developing a detailed package of infrastructure improvements. There are ten programmatic milestones, three of them identified as key. The first is, to what degree do we stabilize as opposed to total stabilization, partial stabilization? What is the necessary level of stabilization to ensure safety for the balance of the project? To what degree do we replace or refine the existing shelter? What is the final strategy for providing safe confinement? And finally, what is the strategy for long-term management of the fuel?

It's pretty much agreed that international guidelines and policy would require eventual removal of the fuel, but has not been agreed as to the timing of that. So the strategy that is necessary then is, when and how do we remove the fuel?

And, associated with that, how do we manage the materials that are removed: the molten fuel, the fractured fuel, and the high-level, radioactive materials that would come out with it?

The work identified in the SIP falls into five principal areas:

• reducing the probability of collapse (the structural stabilization and removal activities)

• reducing the collapse accident consequences (e.g., with the emergency spray system and other measures necessary to provide emergency response)

• improving nuclear criticality safety (provision of improved monitoring systems, provision of measures for removing the water from the Shelter and maintaining the fuel in the dry state, perhaps spiking the fuel with some sort of a poison to ensure that it could not become recritical

• improving worker safety

• converting the Shelter to an environmentally safe site (managing the fuel for the midterm and long term and managing the safe confinement structure).

The Early Biddable Projects were identified to start some of the key activities urgent to risk management, that provide information necessary for the optimization for making of decisions. All of them are on the critical path. They're readily implementable. In other words, we can do these things with information that we have in hand.

It was originally intended that they would create some of the construction infrastructure. The bank modified that approach a little bit by removing the physical work and procurements from the scope of the Early Biddable Projects and putting it into the scope of the PMU. It shouldn't make a lot of difference in the timing of how the work proceeds, but it will make a difference in how it's done.

I think in the handout materials there's a listing of what the Early Biddable Projects are, and also of the companies that were on the short list that are now preparing proposals. I will briefly go over the list of projects and identify where they come from.

The categories for grouping the Early Biddables for the procurement process were civil engineering, operations and monitoring, emergency systems, and fuel-containing material. The elements of each of the Early Biddable Projects that fell within those four groupings were clustered.

The principal one is the civil engineering package. That has the structural stabilization which includes an initial step to look at what is the structural condition and what needs to be done; geotechnical investigation; and then the development of the safe confinement strategy, which is currently the baseline assumption is that the Shelter will be replaced.

Within operations and monitoring there's a seismic characterization. That work has to some degree, already been done by the Italians under an EC project, but there is some additional work left to be done. Radiological protection--we'll build on the kind of work that we're providing in the U.S. program.

Fire safety is something that we have not dealt with extensively yet but it's a key part of the industrial safety activity, providing better monitoring, alarming, and fire suppression systems.

There's an integrated monitoring system. By that I mean the integration of the criticality monitoring, radiation monitoring, and other activities that are involved, spread across these tasks so that there would be a centralized, integrated monitoring capability.

Each of these is the development of the plans, designs, optimization of these activities. The actual work then, to provide the capabilities would be done later under separate procurements.

Emergency systems--the primary need initially is for an improved emergency plan. Some work was done under the bilateral program that developed and outlined requirements. That has been incorporated now into the scope of Early Biddable Projects.

Dust management--the emergency dust suppression system. There has been a considerable amount of work done on a system that would provide both internal and external spray to knock down the principal dust that would be created in a collapse process.

Criticality monitoring I've already described. Contain water management is a collection of things that would improve the collection and removal of water from the roof, pumping of water out of the shelter where it has been collecting, and a treatment process; and ensuring that the fuels can be kept dry.

Fuel-containing material--the scope of the Early Biddables is to provide some additional characterization of the fuel-containing masses. And by that I mean location, radiation, and risk hazards. The characterization of fuel, if it's necessary, including sampling and lab work, would be developed as part of the plan.

It's recognized that a considerable amount of remote technology will be necessary for characterization of the fuel and for its future management. So that activity is also included in here; the technology development for remote technology.

The PMU and the Early Biddable Project called for interest and capabilities were issued in August. There was a 30-day period so the responses went in by September 15.

The U.S. and the EC team that had developed the SIP in the first place proceeded with the development of criteria specifications for the bidding of the Early Biddables. That team however, did not develop the specifications for the PMU because most of the members of the team wanted to be eligible for participation in the competition. So the specs for the Early Biddables went in very quickly but the development of the PMU was a bit slower. The actual RFPs for both the Early Biddables and for the PMU went out mid-December.

The PMU proposal is due on the17th of February. On the Early Biddables they have about a month more; it's due in mid-March.

The PMU will in fact, review the proposals that come in from the Early Biddable candidates and make the awards. And because there are four of them, this will be spread over a period of a couple of months; probably April and May, maybe even June.

The first key decision, stabilization shielding, is scheduled for February 1999. Longer-term projects will be developed from the completion of the Early Biddable Projects and those competitions will be starting sometime in early 1999, then extend over several years.

The project duration is currently estimated at about eight years. Of course, that will be to some degree funding-determined.

In the structure that has been established by the bank for the project, the G-7 is at the top, with Ukraine and the rest of the world as the providers of the funding for the project. The bank, EBRD, is the financial manager. They will pay the bill.

The principal responsible organization is the Chornobyl NPP Shelter Operations Organization. The PMU will consist of management staff from the shelter organization and from a PMU consultant. The PMU consultant will actually have the lead in that role, but it will be shared with the manager from the Shelter.

The plant, being the owner of the facilities, owns the responsibilities to the regulators and to the bank. Now, underneath the PMU consultant, there will be maybe five engineering and procurement organizations. These will be competitively procured fairly quickly after the establishment of the PMU and during the development of the Early Biddable Projects. These EPOs will then do the primary development of the procurements. They will manage the projects that are then established to do the work for the longer term.

There are some other organizations. A liaison group will interface with the Nuclear Regulatory Administration. The Assembly of Donors, which includes members from all of the countries that are donors above $2.25 million, will oversee the overall project.

Procurement policies--the bank of course, has very formalized and fairly rigid procurement policies. They're required to tender goods and services that come up to more than $200,000 and for civil works that are greater than $5 million. And their history has been that they do this in a very formal way. They develop a pre-purchasing plan. In many cases, they will have a pre-qualification in which they'll ask for capabilities and interests and reduce that list to a short list.

This is the process that's been followed for the Early Biddables as well as for the PMU. Proposals will then be given to the pre-qualified candidates and then the process will run.

Actual work on this project should be starting at some time late in the calendar year. Most of the Early Biddables will be completed in a 6- to 18-month period, and probably in that same period the engineering and procurement organizations will be established.

So the project is under way. It's proceeding on a schedule, and every effort is being made to maintain that schedule. The bank had a difficult time getting started. A lot of the principal managers at the bank left just at the time this project was getting going, so they had to hire some more people.

A number of issues are left to be resolved. One of them is the framework agreement which is not yet resolved. So the schedule issue is one that everybody's doing everything they can to keep it going but we, quite frankly, anticipate that it may go slower than the current plan shows.

Q: Who will the contractors be? Are those going to be Ukrainian contractors or is it going to be opened up to European and outside contractors to do the work?

MR. KREID: The way the bank runs the competition is that it's open generally. Every effort will be made to ensure that there's a significant Ukrainian involvement in the project. They have not been guaranteed some part of the project. However, the organizations are teaming in various ways, both within the Ukrainian organizations and with Western contractors, in a way that we believe will bring in the principal Ukrainian companies that have the capability and knowledge.

And quite frankly, that capability and knowledge is necessary I think, to the success of the program. But it will require a focus on making sure that that happens, and the PMU will in fact, be responsible for making sure that that happens. But it's open.

Q: My question relates to the role of NRA, the Nuclear Regulatory Administration. I noticed you had them sort of off to the side on your chart there. I guess it relates to the degree of independent decisionmaking authority it would have, the funding of its effort, technical assistance that it might require.

MR. KREID: I don't have a number but the bank does intend to establish a separate fund to support the Nuclear Regulatory Administration, NRA. That is a project which is being developed I believe--will be paid from the Shelter fund, and its intent of course, is to provide them that independence.

Q: Is there a plan to work with the NRA to provide it technical assistance as well as just funding to keep it up with the technology that's developing on the programmatic side?

MR. KREID: The European Commission just had Riskaudit involved in the technical assistance role. There's not a separately-funded technical assistance specifically focused on the Shelter at this point, other than that. There is a technical assistance program generally supporting the NRA in other nuclear safety areas.

MS. KESSLER: The $10 million worth of assistance to the NRA is largely for them to hire their local technical support organization as well as Western experts to advise them on how to review the stages of the SIP implementation, all the projects.

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