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Armenia will build new reactor but who's paying?

FINANCING is the crunch issue in Armenia's newly announced plans to build a new unit at its Metsamor nuclear power plant. The VVER (water-water energetic reactor) 1000 reactor to be built in a 50/50 joint venture with Russia's Atomstroyexport will, according to Armenian government sources, be operational by 2018.

Yet the USD5 billion price tag is a big ask for a country whose GDP (gross domestic product) shrunk 15% in 2009 due to the global economic crisis. Armenia plans to source 60% of the reactor's funding from private foreign investors, and has been reaching out to Middle Eastern sovereign wealth funds. Russia has a 20% stake in the project under an agreement signed between the two countries' presidents.

Deputy minister for energy and natural resources Areg Galstyan said while Armenia has chosen the 1,060 megawatt capacity Russian reactor, the new project "is open for other investors," and set to break ground next year. Local Armenian media has quoted American diplomat Daniel Rosemblum, co-chairman of US-Armenia Joint Economic Task Force (USATF), (NOTE: NAME AND ORGANISATION BOTH SPELT CORRECTLY) as saying American firms would be interested in tendering for supplying equipment to the new plant. Ashot Martirosyan, chair of the Armenian State Nuclear Regulatory Committee (NOTE: NAME AND ORGANISATION SPELT CORRECTLY), said the participation of multiple international bidders "is to be encouraged."

Management of the construction stage of the new plant appears complex; with the Armenia Nuclear Power Plant Co appointed by the country's Department of Atomic Energy (part of the energy ministry) to oversee Metsamor, though the 50/50 joint venture--called Metzamorenergoatom (NOTE: SPELLING IS CORRECT)--will build the plant. Australian engineering firm WorleyParsons (NOTE: FIRM IS WRITTEN AS ONE WORD) won a USD460 million contract to oversee construction, while Atomstroyexport was named as the principal contractor. It's not clear what roles will be kept for RAO UES and Rosenergoatom (NOTE: BOTH CONTRACTORS ARE SPELT CORRECTLY) which currently jointly operate the plant. Armenia depends on Metsamor for 40% of its annual electricity needs. Nuclear power is a cornerstone of the country's Energy Sector Development Strategy published in 2005, although the county aims to be a regional pioneer of solar and wind energy. Armenia wants to resurrect its role as a technology hub of the region, as it was under the USSR. To justify the expense and sustainability of a new reactor, local experts point to the accumulation of atomic expertise in Armenia--which was the launch-pad for planned (but never built) nuclear power plants in Azerbaijan (NOTE: SPELLING IS CORRECT) and Georgia during Soviet times, explained Armen Gevorgyan (NOTE: NAME SPELLED CORRECTLY), research head at the Department of Atomic Energy.

This mountainous country has few energy choices beyond nuclear. With no end in sight to its dispute over Azerbaijan's ethnic-Armenian province of Nagorno Karabakh, Armenia has no access to its neighbour's abundant gas and oil resources. Hence nuclear power and gas pipelines from Iran are key to Armenian president Serzh Sargsyan's (NOTE: SPELLING IS CORRECT) battle for energy independence.

It seems obvious Russia will win the bulk of any new supplier contracts--it is Armenia's biggest trade partner by a long shot and the country's economic and diplomatic lifeline. Located 30 kilometres west of the capital, Yerevan (NOTE: SPELLING IS CORRECT), Metsamor was originally shut down after a 1988 earthquake devastated Armenia but one of its two VVER 440 USSR-vintage reactors was re-launched after a six year hiatus to rescue the country from severe energy shortages due to a blockade by neighbours Azerbaijan and Turkey.
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Author:Godfrey, Mark
Publication:International News
Date:Dec 1, 2010
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