Viewing cable 09VILNIUS673
Title: AMBASSADOR MEETS WITH HEAD OF NEW NUCLEAR PLANT

IdentifierCreatedReleasedClassificationOrigin
09VILNIUS6732009-12-10 12:57:00 2011-08-30 01:44:00 CONFIDENTIAL Embassy Vilnius
R 101257Z DEC 09
FM AMEMBASSY VILNIUS
TO SECSTATE WASHDC 3968
INFO EU MEMBER STATES COLLECTIVE
NRC WASHDC
DEPT OF ENERGY WASHINGTON DC
DEPT OF COMMERCE WASHINGTON DC
C O N F I D E N T I A L VILNIUS 000673 
 
 
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E.O. 12958: DECL: 12/10/2019 
TAGS: ENRG ECON LH
SUBJECT: AMBASSADOR MEETS WITH HEAD OF NEW NUCLEAR PLANT 
PROJECT AND HEARS DESIRE FOR INVESTMENT 
 
REF: A. VILNIUS 581 
     ¶B. VILNIUS 275 
 
Classified By: CDA Damian Leader for reasons 1.4 (b) and (d). 
 
SUMMARY 
------- 
 
¶1.  (C) The Ambassador's introductory meeting with Sarunas 
Vasiliauskas, head of Visagino Atomines Elektrines (VAE), the 
firm planning the construction of a new nuclear power plant 
in Lithuania, displayed the complexities surrounding 
Lithuania's desire to build a new nuclear reactor. 
Vasiliauskas praised the recent TDA sponsored orientation 
visit (OV) to the United States for the contacts and 
information it provided key Lithuanian decision makers.  He 
also emphasized the GOL's need to find a "White Knight" or 
strategic investor that can shoulder a significant portion of 
the cost for a new nuclear facility.  He said that the GOL 
would be unlikely to choose a nuclear power plant (NPP) 
technology before it chooses a strategic investor, although 
VAE does have a preference for Westinghouse's AP1000 reactor. 
 Vasiliauskas emphasized that he is aware that some large 
European utilities that could fulfill the role of strategic 
investor may come with predetermined reactor technology 
choices.  The invitation to invest (tender for a strategic 
investor) will include a request that the strategic investor 
list technologies they would consider.  To incentivize 
bidders to play the part of a strategic investor the GOL will 
pursue the creation of a single build and operate licensing 
process for the new NPP.  Vasiliauskas also said that Russian 
plans to build a new NPP in Kaliningrad would not derail the 
Visaginas project.  He asked for U.S. help to encourage 
Poland to not be focused on French technology for their NPPs 
and urged us to help the GOL find U.S. and European 
investors. 
 
PRAISE FOR TDA VISIT TO USA 
--------------------------- 
 
¶2.  (C) Vasiliauskas thanked the Ambassador for the recent 
TDA sponsored nuclear orientation visit (OV) to the United 
States.  He praised the high level contacts that were made by 
the Lithuanian delegation within and outside the USG, 
highlighting the meetings with the NRC. 
 
WHITE KNIGHT 
------------ 
 
¶3.  (C) The OV helped Vasiliauskas and the other Lithuanian 
delegates understand the magnitude of the challenge of 
attracting a strategic investor to the Visaginas NPP (VNPP) 
project.  Vasiliauskas showed the Ambassador a document 
titled "White Knight," which detailed the different steps 
awaiting the parties in the project and by its title assumes 
that Lithuania will find an investor willing to provide a 
large portion of the financing for an NPP.  He said he hoped 
that NPP vendors will speak with European utilities about the 
upcoming invitation to invest (tender) for the strategic 
investor.  He mentioned GDF Suez, EDF, EON, Fortum, 
Iberdrola, RWE and Vattenfall in this context.  Vasiliauskas 
added that the GOL would like U.S. investors to join in the 
project although they recognize that a significant share of 
the project would be a challenge for a U.S. utility, as U.S. 
utilities are smaller than their European counterparts, 
headquartered thousands of miles away, and already have 
plenty on their plate in the United States.  He observed that 
the GOL feels it will be easier to invite a smaller European 
utility to invest in the project, i.e., a Swedish or a 
Finnish firm, than the "difficult" French and Germans. 
Vasiliauskas indicated that a sovereign guarantee for the 
recovery of the project cost was not possible at this point, 
as a GOL guarantee could delay Lithuanian hopes to enter the 
Euro Zone (a difficult pill to swallow when Estonia is likely 
to begin using the euro in 2010).  Hence, financing would 
need to be based on the balance sheet of a strategic investor 
and will not be a case of project financing according to 
Vasiliauskas. 
 
¶4.  (C) Vasiliauskas said that during the OV the Lithuanian 
visitors frequently heard from their U.S. interlocutors 
(particularly  Westinghouse) about the need to pick the type 
 
 
 
of nuclear technology before a strategic investor was chosen. 
 He cautioned, however, that this was not necessarily the 
best idea for the Visaginas project, according to 
Rothschilds, the lead consultant hired by the GOL. 
Vasiliauskas said that Rothschilds had advised that picking 
the technology before a strategic investor might eliminate 
interest on the part of some strategic investors. 
 
TECHNOLOGY PREFERENCES 
---------------------- 
 
¶5.  (C) Vasiliauskas reiterated that the GOL has a clear 
preference for Westinghouse's AP1000.  The GE/Hitachi reactor 
design is less attractive because its size might require 
upgrades to the Lithuanian grid.  Vasiliauskas stressed that 
the GOL is not closing the door for bigger reactors, but as 
he has stated before the selection of a larger reactor would 
require grid upgrades that the investors would have to bear 
(reftel A). 
 
¶6.  (C) Vasiliauskas mentioned Polish interest in French 
technology, evidenced by PGE's agreement with EDF, and how 
the selection of a French plant on the Polish or Lithuanian 
side could promote interest in the same technology on the 
other side of the border due to economies of scale resulting 
from building multiple reactors of the same type.  Regardless 
of the Polish technology decision he insisted the Poles 
remained committed to Visaginas.  He has told us in the past 
that the Poles are two to three years behind Lithuania in 
their nuclear plant development plans and, thus, could 
benefit from the experience gained by being a part of the 
VNPP project. 
 
INVITATION NOT TENDER 
--------------------- 
 
¶7.  (C) For the first time in our conversations regarding the 
VNPP with Vasiliauskas he used the vocabulary "invitation to 
invest" rather than tender (Vasiliauskas said this more 
accurately would describe the search for strategic and 
associated investors).  Recently the GOL authorized the 
Ministry of Energy to issue the invitation (tender) for a 
strategic investor by the end of the year.  The next step is 
the appointment of a Tender Commission (which Vasiliauskas 
said he might head).  The Commission will announce the 
requirements for a strategic investor, with the approval of 
the Ministry of Energy.  Vasiliauskas emphasized that the 
prequalification criteria for a strategic investor would be 
that the NPP conform to meeting the need for diversity of 
supply in Lithuania's energy mix, i.e., a Russian reactor 
would not be possible because the associated equipment, 
training, and fuel would make Lithuania even more dependent 
on this source.  He indicated that prequalification and all 
documentation from the parties offering a bid would have to 
be submitted by the end of January.  Vasiliauskas said the 
GOL would like to see non binding proposals from the 
strategic investors by March 2010.  He said that the tender 
will request that strategic investors disclose whether they 
have a choice of technology.  Thus, the strategic investor 
will likely not be chosen until the end of 2010, about eight 
months later than detailed in the previous timeline of the 
GOL Directive 300 (reftel B).  Vasiliauskas clarified that 
adding the technology provision to the strategic investor 
"invitation to invest" process justifies the increased time 
to select a party.  He continued that the GOL sees this as a 
normal business bidding process with the investor being ready 
to drive the design, construction and operation of the NPP. 
 
¶8.  (C) To facilitate attracting investors to the VNPP, 
Vasiliauskas said the GOL will pursue the creation of a 
single build and operate license.  He said that, thanks to 
the OV sponsored trip to the United States, the GOL now had a 
good understanding of the business environment for nuclear 
plant development and was reassured that the NRC is 
comfortable with the single licensing process.  Vasiliauskas 
also emphasized, without prompting by the Ambassador, that 
bribes will not be tolerated in the VNPP project.  He 
enunciated that Rothschilds has advised the GOL that if they 
want transparency in bidding they have to have transparent 
rules. 
 
THE RUSSIANS ARE COMING 
 
 
 
----------------------- 
 
¶9.  (C) Vasiliauskas said that Russian interest in building a 
2300 MW plant in Kaliningrad coincided with GOL selection of 
the Rothschilds as the lead consultant for the VNPP project. 
He joked, "This must have meant we were on the right track." 
Vasiliauskas said Russia has the financing to build such a 
plant and they have free resources with their Turkish project 
not moving forward.  Nonetheless, Vasiliauskas explained that 
the Russian project faces the challenge of distribution.  The 
Kaliningrad grid does not have the capacity presently to 
export such a large amount of power, particularly in light of 
a 900 MW natural gas fired plant opening there by the end of 
the year.  The Polish firm PSE told Vasiliauskas they have no 
plans to build new connections to Kaliningrad.  Yet, the 
Russians are speaking of building electrical connections to 
Germany.  Vasiliauskas emphasized that he would not declare 
that the Russians want to stop the VNPP project.  He 
maintained that VAE had done a market analysis and determined 
that demand for electricity will be greater than generation 
capacity in the region by 2018.  Nonetheless, Vasiliauskas 
said a new NPP in Kaliningrad could attract strategic 
investors that might be interested in investing in the VNPP. 
He said the Germans need electricity as much as they need gas 
and then added rhetorically, "Who can deny there is no deal 
between the Germans and Russians on nuclear?" 
 
HOW THE U.S. CAN HELP 
--------------------- 
 
¶10.  (C) Vasiliauskas said the U.S. could help by attempting 
to influence Poland not to be too inclined to select a French 
option for the NPPs it wants to build.  He added that if the 
Poles go with a French design for their nuclear reactors 
Lithuania will feel pressure to choose the same option. 
 
¶11.  (C) Vasiliauskas also asked if we could help attract 
U.S. investors and/or European utilities to the project.  He 
said, "Ideally I would see an AP1000 with a couple of 
utilities like Vattenfall and RWE behind it."  NOTE:  Embassy 
has already been in touch with Commercial Service 
representatives in Warsaw and hopes that the senior 
commercial representative in Warsaw will be able to meet with 
Vasiliauskas when he travels there this month.  In addition, 
Embassy will watch for announcement of the "invitation to 
invest" (tender) for the strategic investor in the Official 
Journal of the European Union and make sure USG agencies are 
informed. 
 
COMMENT 
------- 
 
¶12.  (C) The Ambassador emphasized strongly that the U.S. 
wants to be as supportive as possible for the VNPP project. 
She offered to be available when necessary and offered the 
help of the U.S. Commercial Service.  Embassy will continue 
to follow this project closely and make sure that USG 
agencies are kept aware of the opportunities and challenges 
surrounding the VNPP. 
LEADER