Czechs sign $18 billion nuclear power plant deal with KHNP after court injunction lifted

By Jan Lopatka

PRAGUE (Reuters) -The Czech state-controlled company EDU II and South Korea's KHNP signed final contracts to build two new nuclear power reactors on Wednesday, Prime Minister Petra Fiala said, after a court lifted an injunction barring the deal from closing.

A Czech high court gave the green light on Wednesday to the $18 billion transaction, the country's biggest procurement deal ever, and a key part of the state's drive to replace ageing coal and nuclear units.

"We have removed all doubts and legal obstacles that prevented the nuclear power plant project from being launched," Fiala told a broadcast news conference after the signing, which took place digitally between EDU II and KHNP representatives.

Power firm CEZ  picked KHNP last year to build two 1,000-megawatt units to expand its Dukovany nuclear plant, giving KHNP its first project in Europe. The first unit is planned for completion by 2036.

Losing bidder EDF of France had challenged the tender and won an injunction from a lower court last month, derailing the signing of the contract that was planned for May 7, with a ceremony prepared and a Korean delegation already en route to Prague.  

However, EDU II - in which CEZ had a controlling stake until last month - and KHNP appealed that ruling, and the court said on Wednesday it found the injunction illegal and unverifiable.

The injunction was a major obstacle threatening the project's timeline amid possibly lengthy court battles and the looming expiration of KHNP's bid.

KHNP said Wednesday's court decision "clears the way for the timely advancement of this strategically important project."

EDF had no immediate comment on Wednesday's court ruling.

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The Czech Republic gets about 40% of its electricity production from two existing nuclear power plants. Its power exports are declining as its surplus shrinks due to the decommissioning of coal plants.

The price for two new nuclear units should be 407 billion crowns ($18.69 billion) in "overnight" costs, meaning without the cost of financing and increases based on contracted inflation clauses, and subject to exchange rate fluctuations.

The government, which will provide loans and a pricing scheme to make the project profitable, took an 80% stake in EDU II from dominant electricity producer CEZ in April, with CEZ retaining 20%. The state owns 70% of CEZ.

The lower court which issued the injunction will hold a hearing on the matter of EDF's complaint against the tender itself on June 25.

Separately, EDF, the only European company building nuclear plants, sought to cancel KHNP's win through the European Commission on competition grounds, suggesting KHNP's offer was so low that it implied state aid. KHNP has denied any state aid.

Czech Industry Minister Lukas Vlcek said the government was cooperating with the Commission and no formal probe was underway.

The Czechs also need to get new EU approval for state loans and an electricity price mechanism for the plant after they expanded the project last year from one reactor - which won EU clearance - to two.  

($1 = 21.7760 Czech crowns)

(Reporting by Jan Lopatka and Jason Hovet in Prague, Joyce Lee in Seoul, and Forrest Crellin in Paris, Editing by Alexandra Hudson and Sharon Singleton)