Press Release - Wednesday, December 12, 2001

NEWS RELEASE -- Wednesday December 12, 2001
The Sierra Club of Canada has denounced a risky request for 390 million dollars in Canadian taxpayer funds to finance a second CANDU reactor in Romania. Public interest groups in Europe are also calling on their respective governments, export credit agencies and the European Commission to oppose loans for the Cernavoda-2 CANDU reactor in Romania.
One CANDU reactor (Cernavoda-1) has been operating in Romania since 1996, but the Cernavoda-2 reactor is only 20 to 40% complete, and will require an investment of over 1 billion CDN dollars (700 million US dollars) to make it operational.
The Canadian government’s nuclear company, Atomic Energy of Canada Limited (AECL)is a partner in the project with Ansaldo Nucleare, a state-owned Italian nuclear company. AECL and Ansaldo hope for financing from three sources.
AECL is seeking about 390 million CDN dollars (250 million US dollars) in financing from the Canadian government’s export credit agency, the Export Development Corporation (EDC). Ansaldo is seeking 150 million Euros (about 210 million CDN dollars) from the Italian export credit agency SACE. The Romanian state nuclear company Societatea Nationala Nuclearelectrica has asked for a loan of 350 million US dollars (about 550 million CDN dollars) from EURATOM, the European Atomic Energy Community. Decisions on all three controversial loans are imminent.
In Canada, the huge 390 million dollars loan would be administered by the EDC, but would be a “Canada Account” loan, made directly from the government’s main operating account, the Consolidated Revenue Fund, because it is too risky for private sector financial institutions or the normal corporate transactions of the EDC. The Cabinet has already given support in principle for the loan, and Government House Leader Don Boudria headed a hush-hush Canadian delegation to Romania last October 8-11 to offer official support for the project. In March 1999, 164 members of parliament -- a majority of MPs including one third of the governing Liberal party -- came out publicly against federal government financial support for Cernavoda-2. EDC refuses to disclose any details, but in response to the EDC approval process, AECL has released an environmental assessment document for a 45 day public comment period that began on December 1st.
In Italy, environmental and globalization activists are demonstrating at the SACE headquarters in Rome today against possible support for the Cernavoda-2 project. They claim that the financial support violates the terms of a 1987 national referendum in Italy that forbade support for new nuclear power plants.
The 550 million dollars EURATOM loan is also controversial. The European Atomic Energy Community (EURATOM) is the joint European Union agency established in 1958 to promote nuclear power. In 1994, EURATOM loans outside of member states were restricted to projects “for improving the degree of safety and efficiency of nuclear power stations”. This was clearly aimed at Eastern European reactors built by the former Soviet Union, and would not seem to apply to a new CANDU reactor in Romania. European Union enlargement Commissioner Gunter Verheugen is scheduled to visit Romania on December 17th. The safety of Soviet-era nuclear reactors has a been a high profile hurdle for admission of former Soviet block countries to the Union.
Romania has no need for the electricity from the Cernavoda-2 reactor. Installed generating capacity is already about three times peak demand.
Dave Martin, Nuclear Policy Advisor for the Sierra Club of Canada, stated: “The Romanian reactor loans are risky deals for an unsafe technology in a country where the electricity is unneeded. Romania already has twice the generating capacity that it needs.”
“The economic viability of the Cernavoda-2 reactor will depend entirely on un-confirmed electricity export deals. Nuclear power is a high-cost energy source with environmental and safety problems. It does not deserve international financial support.”
“Typical of AECL, it has conducted a grossly inadequate environmental assessment on the Cernavoda-2 project, and is trying to minimize public comment by posting the document over the winter holidays.”
Enclosed below:
Backgrounder: Romania’s Cernavoda-2 Nuclear Reactor
For more information:
Dave Martin, Nuclear Policy Advisor, Sierra Club of Canada
Tel: 905-852-0571
December 12, 2001

Historical Background
In 1979, Canada’s export credit agency, the Export Development Corporation(EDC), provided a 1 billion (US) dollars loan to Romania for construction of the Cernavoda nuclear station.[1] Canada’s state nuclear company, Atomic Energy of Canada Limited (AECL), cooperated with the forced labour construction of the plant by Romanian dictator Nicolae Ceaucescu. At the time, Ceaucescu had
grandiose dreams of building five or more reactors, but these plans collapsed through technical incompetence and lack of funds. The huge financial strain of the nuclear program contributed to the collapse of the regime in 1989 when Ceaucescu was executed. A rescue plan by AECL and the Italian company Ansaldo came in 1991, including 370 million dollars in further loans from the EDC, as well as additional Italian financing.[2] Cernavoda-1ended up costing an incredible 2.2 billion dollars [3], and did not start up until April 1996, almost twenty years after negotiations were first started.
During his May 1998 visit to Canada, former Romanian President Emil Constantinescu asked Prime Minister Chretien for a 1 billion dollars loan for Cernavoda-2.[4] Constantinescu said that the Romania did not want to provide a 100% guarantee for any Canadian loan. In addition, Romania wanted a longer payback period and a four-year holiday before loan payments start.[5] It is now known that it will cost about 750 million US dollars, or over 1 billion CDN dollars [6] to complete Cernavoda-2. AECL has stated that Canada would finance only one-third of that (250 million US dollars, or 390 million Canadian dollars).[7] In March 2000, Patrick Lavelle, Chairman of the EDC Board of Directors, stated that “EDC is presently participating in interdepartmental meetings to determine whether Canada Account funds would be available in support of AECL’s contract and, if so, under what conditions such support would be extended.”[8]
Ansaldo has approached Mediocredito Central and SACE, the Italian export credit agency for financing[9], reportedly in the amount of 150 million Euros (about 210 million CDN dollars). Romania has also made application to EURATOM for a 350 million US dollars loan[10] (about 550 million CDN dollars). Large loans to Romania will undoubtedly carry a high risk. Because of its weak financial position and slow movement on market reforms, the International Monetary Fund (IMF) has in the past put constraints on Romania against taking large foreign loans, such as would be required to complete Cernavoda-2.[11]
Romania Does Not Need Additional Electricity

The proposal to proceed with Cernavoda-2 is absurd given the fact that Romania
has a huge three-fold surplus of generating capacity. In 1999, total installed
capacity was 19,676 MW, [12] and peak demand in 1998 was only 6,000 MW.[13]
Construction of the nuclear plant will cause dislocation of the existing system, and ultimately depends on electricity exports which are still unconfirmed and are dubious at best.

An EDC Canada Account Loan for C-2?
Canada’s state-owned export/import bank, the Export Development Corporation
(EDC) has been approached by the government’s nuclear company, Atomic
Energy of Canada Limited (AECL), to provide a loan to the Romanian nuclear company Nuclearelectrica. AECL has suggested that the loan would be for about 250 million US dollars, or about 390 million CDN dollars at today’s rates. The loan would likely be under the “Canada Account”. Under Section 23 of the Export Development Act, a Canada Account loan is not a normal commercial transaction. It requires the concurrence of the Ministers of both International Trade and Finance, and an acknowledgement that the deal is “in the national interest”. The monies are then provided by Canadian taxpayers from the Consolidated Revenue Fund, the main operating fund of the government. EDC has described Canada Account transactions as typically having “long lead times and a high degree of uncertainty” [14].

1. Export Development Corporation, News Release, NR 79-21, April 30, 1979.
2. Letter from D. Ward , EDC, to Dave Martin, Sierra Club of Canada, May 16,
3. Jennifer Wells, “Going Critical: Canada's Nuclear Misadventure in Romania”,
The Globe & Mail Report on Business Magazine, June 1995, p. 38.
4. Ray Silver, “Romanians seek funds to finish Cernavoda; eye exporting
Nucleonics Week, May 28, 1998, p. 3.
5. Randall Palmer, “Italy offers to take Romanian nuclear power”, Reuters, May
25, 1998. See also: Geoffrey York, “Romania seeks reactor loan”, Globe and
August 6, 1998, p. A12.
6. Mark Hibbs, “RENEL aims to finish Cernavoda-2 by 2000, but later date
likely”, Nucleonics Week, July 4, 1996, pp. 11-12.
7. Mike Trickey, “Deal Close for CANDU”, Windsor Star, August 10, 2000, p.
8. Letter from Patrick Lavelle, Chairman of the Board, Export Development
Corporation, March 16, 2000.
9. Patrick Lavelle, ibid..
10. Ann MacLachlan, “Cernavoda-2 completion bolstered by Romanian government
support”, Nucleonics Week, September 14, 2000, pp. 1, 10-11.
11. Ann MacLachlan, “AECL offers Romania financing to begin Cernavoda-2
completion”, Nucleonics Week, March 5, 1998, p. 3.
12. National Commission for Nuclear Activities Control (CNCAN), Romania
Report, Tenth Plenary Meeting of the G-24 NUSAC Group, Bruxelles, March 25-26,
1999, p. 1.
13. Dan Floru, “Reorganization of RENEL”, International Market Insight,
and Eastern Europe Business Information Center, October 7, 1998, p. 2.
14. Summary of the Report to the Treasury Board on EDC’s Canada Account
Operations for the Fiscal Year 1997-1998, Export Development Corporation,
p. 4.
Nuclear Campaign - Sierra Club of Canada
c/o P.O. Box 104
Uxbridge, Ontario, Canada L9P 1M6
(tel/fax) 905-852-0571 (e-mail)>http://www.sierraclub>.ca/national
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