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EU Energy Policy:
- EURATOM Loan Increase

Updated: June 2014

Since 2004, no decision has been taken on the increase of Euratom Loan. In 2008, however, Andris Piebalgs, the EU Commissioner for Energy has repeated in his speeches the growing need for investments to replace ageing plants, adding that the EU Commission was examining this issue.

Index of this Page:

· INFORSE Recommendation. Read

· Status. Read
· Content and Background of Proposal. Read
· Euratom & Safety Standards. Read
· EURATOM & Decommissioning. Read


INFORSE Recommendation
INFORSE recommends that the EU countries reject the proposal for increase of the Euratom loan ceiling, that the remaining funds are used solely for supporting decommissioning activities, and that the loan facility then be closed.


Status
The proposal is still on the table of the EU countries ministers of finance and it was not discussed during the Irish Presidency (2004 Spring) or the Dutch Presidency (2004 Fall). No decision is made.

It is expected that the proposal must be approved by all countries (unanimous), but the Council’s legal services are reviewing the procedures. In the Council paper 5871/03, Contribution to the Legal Services to the Proceedings of the Working Party of Financial Councilors, 29th January 2003, it states: ‘ The decision in question [increase in the Euratom Loan ceiling] could therefore be adopted if a majority of the members of the Council Voted in favour of it’.

The countries discussed the proposal in December 2002, where the German , Belgium and Austrian government stated that they did not agree with the proposal. In Germany this position was supported by a resolution in the German Bundestag, March 2003.

The Commission proposed the increase of EURATOM loan ceiling by 2 billion Euro, November 6, 2002 as part of a nuclear package. The Parliament has no decision-making power in this question. The proposal also includes new guidelines for the loan facility.


Content and Background of Proposal
In March 1977, the Council of the European Communities agreed on "empowering the Commission to issue Euratom loans for the purpose of contributing to the financing of nuclear power stations with an initial credit ceiling of 500 million European units. As projects were financed so the loan fund had to be increased, most recently in April 1990 by another 1 billion ECU to the current ceiling of ECU 4 000 million. The increasing of the Euratom Loan facility requires the unanimous support of Member States, but does not require the approval or involvement of the European Parliament.

At the last increase in the loan ceiling was approved in 1990 it was stated that :
-
When the total value of the transactions effected reaches ECU 3 800 million, the Commission shall inform the Council, which, acting unanimously on a proposal from the Commission, shall decide on the fixing of a new amount as soon as possible .

In recent years, two loans have reached the final decision stage. The loan for the Kozloduy 5 and 6 (K5 and K6) in Bulgaria, and the loan for Khmelnitsky 2 and Rivne 4 (K2/R4) in Ukraine. In the case of K5 and K6 a loan of EUR 212.5 million was approved in 2000, but only provisional approval was given for the loan equivalent of USD 585 million for K2/R4. It was expected, and required, that final approval would be given within 12 months. However, just prior to the final decision, at the co-funder the European Bank for Reconstruction and Development (EBRD in November 2001), the project was suspended.

The EU Commission approved on July 20, 2004 a loan of 83 million USD to the Ukrainian Khmelnytski 2 and Rivne 4 (K2R4) reactors to work after planned start up in the last part of 2004 to (hopefully) improve safety of the reactors.

The 1990 Council's decision requires that the "total value of the transactions affected reaches ECU 3800 million". The K2R4 decision is at best a draft approval, this does not constitute a transaction, therefore the Commission's proposed application for a loan ceiling is invalid, as the total value of actual transactions is less than ECU 3300 million. Therefore, the Council can reject the Commission's proposal on this single basis.

In its application to increase the loan ceiling the Commission gives two main justifications for the increase, namely that "our involvement in these projects ensures that they will be completed in line with Western safety requirements" and "the Euratom Loan facility will be instrumental in assisting these countries - Bulgaria, Lithuania and Slovakia - to launch decommissioning programs".


Euratom & Safety Standards
One loan is actively under preparation for the completion of the 2. Canadian licensed reactor in Romania at Cernavod. It is proposed the Euratom will fund EUR 250 million of the EUR 700 million project with the remainder coming with guarantees from Export Credit Agencies (ECAs) from the countries undertaking the construction, namely, Canada, France, Italy and the US. The involvement of Euratom does not seem to bring any additional safety standards or significant design changes compared to the first reactor at Cernavoda. Furthermore, Euratom's potential involvement to date has not increased the standards of the public participation process, which falls below the standards required of Romanian and international law.

In the only prior project funded by a Euratom Loan in Eastern Europe, at Kozloduy 5 and 6 in Bulgaria, the involvement of Euratom was not a fundamental part of securing any increase in nuclear safety standard. The project was completed with ECA financial support from US Export-Import Bank, which has its own nuclear safety standards requirements, furthermore, it was originally envisaged that both the French and Germany Government ECAs would contribute to the project. However, their assistance was not needed with the Euratom Loan being awarded. Therefore, the Euratom Loan was not unique in proposing to bring Western nuclear safety standards to the project, but rather replaced other Western financial agencies in the funding consortium.


EURATOM & Decommissioning
The financing of the decommissioning of nuclear reactors in Central and Eastern Europe is a key issue, as is investing in the alternative energy sources to enable closure and measures to reduce the direct social impacts. For this purpose, the International Decommissioning Fund, allocates grants and not loans to assist with the decommissioning. Decommissioning is undertaken after the reactors have stopped operating and when all electricity and therefore income generation has ceased. It is therefore difficult to imagine how the loan will be repayed and how such a project will fulfil the requirement that the Euratom loans are "financially viable".
For further assistance for decommissioning, the existing International Decommissioning Fund should be enhanced with additional grants. One reason for not using EURATOM for this is that the existing agreement to allow EURATOM loans in Eastern Europe specifically stated that loans could be given for decommissioning of nuclear facilities, but this has not been taken up and in the future it will not do, as such project cannot be economically viable.
Read about the proposal at: www.eu-energy.com

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