Details of Visaginas Nuclear Power Plant project revealed

Lithuania would hold a 38 percent stake and its total contribution in kind, as estimated by the Finance Ministry, would make up some 2.6 billion euros in a ten-year period. If the concession agreement was terminated during the preparatory stage, Lithuania would have to reimburse almost 700 million litas (EUR 202.9 m) in investments to the project partners. Although the investments are huge, the project is cost-effective, financial experts claim.

In line with a draft concession agreement, which the government approved on Wednesday, Latvia should get a 20 percent stake in the company that will manage future Visaginas Nuclear Power Plant and Estonia should hold a 22 percent interest.

The Cabinet took final decisions on a package of documents related with the planned nuclear facility. If the Seimas (parliament) endorses the documents, Lithuania and Hitachi expect to sign a concession agreement by 28 June at the latest.

The package approved by the government also includes a business plan for Visaginas Nuclear Power Plant, the Finance Ministry’s conclusions on the financial risks involved in the project, a new version of the Law on Nuclear Power Plant and certain amendments to related legal acts. The drafts will be immediately submitted to the Seimas, which is expected to start deliberations on the package as early as next week.

Unofficial sources say that Poland, which suspended its participation in the approximately 16-18 billion litas worth Visaginas Nuclear Power Plant project last December, may reverse its decision, in which case the second Hitachi’s nuclear reactor would be built in Lithuania bringing the total capacity of the facility to 2,700 MW.

The new nuclear facility project costs are estimated to range between 4.6 billion euros and 5.2 billion euros. Lithuania, which would have to contribute 6-6.8 billion litas, might borrow some 45-55 percent of the total amount of its investments. Loans would be covered by state guarantees.

If the Seimas passes the drafts, the concession agreement with Hitachi will be signed by 28 Junr. In line with the draft agreement, building permits should be received by 31 July 2015, and concreting works should be launched by 31 July 2016. The facility should be launched and start generating electricity by 31 December 2022.

Preparatory works, which would be launched after the signing of concession agreement, are estimated to cost some 300 million euros, of which some 115 million euros should be funded by Lithuania. These works are expected to be completed by the end of 2015 when the final investment decision should be signed.

During this stage, Lithuania would build new roads or upgrade existing roads from the port of Klaipeda to Visaginas. Investments into this project are estimated to reach 80 million euros, which would be allocated from the Lithuanian budget funds assigned for roads.

Preparatory works would be funded by contributions from all shareholders of the project implementation company. Lithuania’s contribution would be allocated from the funds at the disposal of energy holding company Visagino Atomine Elektrine (VAE), i.e. the dividends paid by the company’s subsidiaries (Lesto, Lietuvos Energija and Litgrid) for 2011 and to be paid for 2012-2014. Litgrid alone will pay to VAE 381 million litas in dividends for last year, and Lesto – close to 141 million litas. VAE will have to transfer 275 million litas from that amount to the state budget.

In line with the concession agreement, if the deal is terminated through Lithuania’s fault, the state will have to buy out the company’s shares from other shareholders and to cover their losses. Assuming that Hitachi and regional partners will invest some 185 million euros during the preparatory stage, Lithuania’s liabilities would at most reach some 195 million euros.

If the final investment decision is taken by the end of 2015, Lithuania will have no right to terminate the agreement later.

Lithuania ’s commitments in kind by that time would include a land parcel for the new nuclear facility, and intellectual property created by existing VAE (with an agreed value of at least 50 million euros).

Lithuania ’s indirect commitments in kind, adjusted for inflation in 2012-2022, loan interest costs and other factors, are estimated to reach some 2.6 billion euros.