Ukraine's Nuclear Energy Complex: Status and Developments

I would like to express my profound gratitude for the granted opportunity to speak in front of such a respectable and professional audience and, first of all, to say that as far as I am concerned, the seminar has been appreciably useful. This has resulted in the fact, that I had to put away my previously prepared speech and to spend the entire night writing a new one. Yesterday, I realized what it was that needed to be said in this room. I will try to explain the circumstances that I deem to be of the investor’s interest.

Circumstance 1. I would put it this way: the irreversibility of development of the Ukrainian nuclear power and the accompanying nuclear fuel cycle, industry, science and technology.

You can judge from the following: the amount of uranium-based electricity production constituted 44.6% of the gross output by the end of 1997, while the statistics for other types are as follows: 26.1% -- coal, 21.1% -- gas, 2.6% -- oil, 5.6% -- hydro.

By the year 2001, when two new nuclear power units, Khmelnytsky-2 and Rivne-4, are put into operation (which will definitely happen, and I am sure you will be involved in it) the share of electricity produced at Ukraine’s NPPs will negotiate the 50% point.

You should also remember that there is no oil or gas in Ukraine, and our coal is of such a poor quality that with respect to the existing environmental limitations it could not be competitive.

Remember that our zirconium deposit is large enough to meet demands of all of the former Eastern Bloc countries for the next 1000 years. Today, we are completely covering the needs for zirconium ore in these countries.

Any country in our position would bet on the nuclear option and take care of its development. So do we. To prove this, I am going to list the following facts:

• the moratorium on construction of new nuclear power units has been lifted
• priority building of the legislative and normative/legal basis is being effected
• Ukraine has joined all fundamental conventions and strictly tends to use nuclear power only for peaceful purposes. This should be absolutely clear. It was our country that was first to show an example of voluntary nuclear disarmament
• finally, the words of our Members of Parliament spoken here – you would not have heard anything like this 5 years ago.

Taking into account the fact that all this has happened following the Chornobyl accident, I believe that we can safely speak here about the inevitability of further development of Ukraine’s nuclear power.

Circumstance 2. The investment climate will get better with every year. If this is not the case, then why do we follow the recommendations on the creation of the energy market so persistently? Not all of the things work out today, the market is not conducive to the competition yet, and, what is worse, it does not ensure acceptable settlements for the electricity, this being the fact for the NPPs, too.

However, those who follow market developments should note two facts: first – the irreversibility of the process, second – timely corrections made on the state level, that are conducive to the acceleration of this process. Here, I can see two approaches that can possibly be used by investors: one – wait and see, two – help the market to become stronger. Thereby, today, privatization of all regional utilities has been temporarily – I want to emphasize this point – suspended. Our privatization experience with nine of them has displayed the fact that we still do not have a strategic investor, who is able of competent and professional management and investments into the system’s development. The customers are here to «skim the cream». Where do we find this investor? We are willing to offer this role to the foreign companies. EDF, a French company, has already become actively involved in this process. We are waiting to see the Americans join the market. Yesterday, I heard one speaker say: «we have to wait for the Ukrainian economy to wake up» and I thought, could it be a better idea to breathe a new life into it? We admit the fact that in order to do it we need your presence on our market.

Circumstance 3. I dare formulate it and if you think I’m wrong, may it become the subject of our discussion.

I can state that we are going to ensure the attractive quality of our market by our geographical location, scientific potential, frozen industrial potential yet to be demanded in the context of conversion, high professionalism of personnel and low labor cost.

It was suggested yesterday that we could be used as a test field, as the bridgehead for American presence in Central Europe. No problem, we do not mind, but some fields become blossoming meadows and some turn into deserts.

First one we like. Also, you and us already have a common American-Ukrainian experience. I would like to tell you about it.

In 1992, DOE, DerzhKomAtom, Khartron company and Westinghouse, a company well known to you all, established a venture in Kharkiv and named it Westron. It was to manufacture and supply modern control and instrumentation systems for the Ukrainian nuclear power plants.

Westinghouse did not use solely the US Government funds, it also risked its own capital (I shall not say how much to keep the commercial secret it might constitute).

I was an active participant of this project and I know it has also been useful for Westinghouse with regard to the know-how they got to learn from Khartron and Ukrainian NPP specialists.

What has been done? Allow me to read out the following information:

Westron consortium, founded by Khartron Incorporated and Westinghouse company, owns the productive capacities, modern technology and qualified personnel that allow it to manufacture, modernize and supply systems that are part of computerized process control systems at the NPPs using VVER-1000 and VVER-440 type of reactors, including safety-related systems.

Particularly, the following systems have been supplied to the NPPs or are being completed:

• information and computer systems for automated control of nuclear power units (IVS)
• safety parameter display systems (SPDS)
• systems for control and regulation of turbogenerators
• systems for feedwater supply and level control in steam generators
• reactor control and protection systems (CPS), including the emergency and preventive protection system (AZ, PZ), automatic power control (ARM), limiting power switch (ROM), seismic protection system (SIAZ)
• control safety systems (USB)
• automated radiation safety monitoring systems (ASKRB)
• systems for group and individual CPS rod control (SGIU).

Westron consortium is ready to supply the aforementioned systems to the Ukrainian NPPs including Unit 4 of Rivne NPP and Unit 2 of Khmelnytsky NPP any time and in a very expeditious manner.

And we shall let them do it, because it is not just the matter of Westinghouse or Hartron, it is a new US-Ukraine joint venture. Making provisions for its competitiveness on our market, not only we secure the Westinghouse’s expected income, but also protect our national manufacturer – you know that every existing job is very important to us.

No, Westinghouse are not having an easy walk today, but they have a future not only on our market, but on those of the neighboring countries. Russian MinAtom has already displayed interest in this issue.

I do not want you to think that there is just this. I am very grateful to the country I am visiting now, for its government and private businesses have been rendering our nuclear power industry the most effective assistance in comparison to other countries. Here is a list of major topics and problems, that have been or are being solved with the help of the US:

• in-depth safety assessment at the South Ukraine Unit 1 (1996)
• in-depth safety assessment at the Zaporizhya Unit 5 (1997)
• in-depth safety assessment at the Khmelnytsky Unit 1 (at preparation stage)
• creation of the SPDS system at Zaporizhya NPP (1997-98*

As part of the Lisbon Initiative:

• creation of a full scale training facility at Khmelnytsky Unit 1 (1994-97)
• modernization of the full scale training facility at Zaporizhya Unit 5
• analytical simulator for Chornobyl Unit 3 (1997)
• full scale training facilities for Units 1 & 3 at the South Ukraine NPP (project launched)
• project of a full scale training facility for Zaporizhya Unit 1.

In association with Westron:

• modernization of the IVS system at the South Ukraine NPP -- complete
• modernization work at Unit 2 of South Ukraine NPP -- in progress
• a safety parameter display system is being created for Chornobyl Unit 3, Zaporizhya Unit 5 and Khmelnytsky Unit 1.

Participation in the Chornobyl nuclear safety improvement project (118.1 million granted)

• Westinghouse Energy Systems Europe
• National Nuclear Corporation
• Chornobyl NPP, Units 3 & 4 ventilation stack repair (Battell)
• Spent nuclear fuel storage system project for Zaporizhya NPP (Duke Engineering)

EC/US/Ukraine joint project on the action plan concerning the social problems of the Chornobyl NPP personnel and the town of Slavutych.

Circumstance 4. There is a widest field for various activities, extremely broad spectrum of problems – from tiny and cheap to fundamental, prospective and expensive. I have to say that nuclear power does not only bring good things to my country. It is also a disaster. Today it mutilates our foreign trade balance. To keep it afloat we have to import:

• scientific services worth of up to $100 million, annually
• equipment, materials and spare parts, up to $250 million, annually
• nuclear fuel, up to $350 million a year
• nuclear spent fuel storage services, up to $250 million, annually.

This adds up to almost $1 billion. This is too much for us. And the main thing is that we are sure that an investor coming to our country to solve these problems will work on mutually profitable conditions for both him and Ukraine.

Allow me to express my point of view on some possible solutions to these problems.

First of all – nuclear fuel. We believe that monopoly on nuclear fuel supply not only constitutes a threat to the economical and political security, but also causes lack of stimuli for the betterment of fuel quality and the ensuing improvement of reactor reliability and safety. We will put every our effort into finding an alternative supplier. Not only we will assist him in creation of fuel for our reactors, but also will make sure there is a demand on the market for his supply. However, we do not conceal the fact that preference will be given to a company willing to establish a joint venture, to pass over fuel manufacturing technologies, to involve our potential in their production process and to bring in the second wind for our scientists and designers. Then we will be obliged to make it coming up to hopes of such company for having a successful business.

I will talk about yet another fundamental problem – the choice of the future reactor.

In 2012, we have to have an operational unit using a new reactor type. This means that we have very little time left to make our choice. Not only we count on this reactor to replace the exhausted units, but also to become a capital nutrient medium (forage, if you wish) for our industry. The Spanish approach to this problem appeals to us very much. American companies that created the nuclear industry in Spain were far from suffering any losses, weren’t they? I am sure it will also be profitable for those who decide to work on this problem with us. We closely follow all news in the field of design, engineering and manufacturing of new reactors and their NPP uses, and we know, that absence of US companies in solving these problems would not be desirable for us at all.

Many of the problems have been outlined by my colleagues, who spoke yesterday, but I wish to emphasize one of them. I mean Chornobyl. American presence is already big here and I am sure it will grow, which we will certainly welcome. I would like to warn the participants of this process about one thing. The goals of the Chornobyl program are not restricted to the close-down of the first, second and third units (by the way, two of them have been already shut down) or turning the fourth unit into an environmentally safe system, but also stretch to the creation of a radioactive waste processing, long term storage and burial system with respect to the entire nuclear fuel cycle of Ukraine. This becomes clear if we consider the fact, that 95% of radioactive waste in Ukraine are concentrated in the vicinity of the fourth unit and only the other 5% rest elsewhere, including at the NPP sites. Plus, we are dealing with radwaste of all types and classes, many of them have never been encountered by the world community, and many are not even known to us yet.

For this reason, we have to establish a powerful complex enterprise that will deal with the processing, storage and burial of radwaste. Should we fail to do this, the money given by the world community will be wasted and the dangerous radioactive foul place will remain for long in the middle of Europe.

Yesterday, a question was asked here: are we going to accept other countries’ radwaste? We are not authorized to answer this question. Although I can share my personal opinion: when the dangerous radioactive technologies become safe enough not to pose a threat against the environment and the mankind, this problem will cease to be the matter of politics or public concern but rather a purely business one.

And the last point. Yesterday, David Marcelli was fair to mention certain negative implications of doing business in Ukraine. The principle of stick and carrot, that’s what it is. And also, adherence to unrealistic plans, lack of information, language barrier, customs office.

Dear David, who did we have to learn from? You neither have ever had an experience of transition from "advanced" socialism to capitalism. And to be completely frank, we are not that much excited by your bureaucratic procedures either. Still, it would be fair to say that we have been changing our conditions, which has not been happening to our Western partners.

But we wish to learn, are learning and will learn our lesson. Besides that, from my contacts with the Americans I have learned that the things we have in common are far more numerous than the ones that separate us. Spiritually we are very close and this inspires my optimism.

Thank you for your attention.