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Community Contribution to EBRD Chernobyl Shelter Fund: 4Th Pledge, 5Th Instalment

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Community Contribution to EBRD Chernobyl Shelter Fund: 4Th Pledge, 5Th Instalment Community Contribution to EBRD Chernobyl Shelter Fund: 4th Pledge, 5th Instalment Description Background The Chernobyl Nuclear Power Plant (ChNPP) is situated 110 Km north of Kiev. Its construction began in the 1970s and by 1983 four units were in operation producing about 10 percent of Ukraine’s electricity. Two additional units were under construction. On 26 April 1986, the world’s worst nuclear accident occurred, which destroyed Unit 4 of the power plant and resulted in the release of radioactive materials into the environment. The nearby city of Chernobyl, located about 15 km away from the power plant had a population of 12,500, but the city was not the residence of the power plant workers. When the power plant was under construction, Prypiat, a city larger and closer to the power plant, had been built as home for the power plant workers. It had a population of just under 50,000 at the time of the accident. Evacuation of the population of Prypiat began about 40 hours after the accident. Later other population areas within a 30km radius were evacuated, including the city of Chernobyl. By 14th May 1986, some 116,000 people had been evacuated. In the years following the accident, a further 220,000 people were resettled into less contaminated areas, and the initial 30 km radius exclusion zone (2800 km2) was modified and extended to cover about 4300 km2. Following the accident a Shelter (sometimes referred to as a ‘sarcophagus’) enclosing the remains of ChNPP Unit 4 was constructed under exceedingly hazardous conditions. Units 1, 2 and 3 (adjacent to Unit 4) were put back into operation, raising the fear of another accident. The G7 countries and the European Commission (EC) took the lead in providing assistance to mitigate the consequences of the accident. The Memorandum of Understanding between the G7, the EC and Ukraine on the closure of Chernobyl by the year 2000 (Ref. 1) reflects the commitment. The Commission has played a major role in its implementation through the Tacis programme. The G7 (now G8) and the Commission have reaffirmed the intention to continue their support at several summits. The Shelter was not intended to be a permanent solution. In fact, it became increasingly unstable and deteriorated allowing the ingress of rainwater. There was a risk of collapse due to seismic disturbance, extreme weather or further deterioration of the structure. There existed a strong possibility of contamination of the surrounding zone until the highly radioactive material contained under the Shelter could be adequately isolated from the environment. In May 1997 a group of international experts from the EU, USA, Japan and Ukraine finalized a multidisciplinary construction management programme designated as the Shelter Implementation Plan (SIP). The development of the SIP was financed by the TACIS programme and the US DoE. It envisaged remedial work on the Shelter directed towards making it physically stable and environmentally safe. In the same year, the G7, the Commission and other donors requested the European Bank for Reconstruction and Development (EBRD) to set up the Chernobyl Shelter Fund (CSF) to finance the SIP. In 2007, ten years after the agreement on the SIP between the G7, the EC and Ukraine, most of its tasks had been completed. The required site infrastructure and facilities had been built and the stabilization of the shelter had been finished. This made possible the start of the construction of the New Safe Confinement (NSC) which represents the last major construction project at the site. Important delays occurred in the implementation of the SIP, impacting both the date of commissioning of the NSC and the overall cost. The delays were mostly caused by the lack of a stable institutional environment (frequent changes in the political leadership and upper management caused disruptions), the time required for the regulatory reviews and technical decisions (which had not been included in the original schedule) and the requirements to create a legal and regulatory framework to address the unique situation caused by the accident and the needs of the SIP. The initial indicative cost of the SIP (calculated in 1997) amounted to approximately US$ 758 million (US$ 768 million including the licensing support) and a construction time of seven years (1998-2005). First Pledging Conference and related EC contributions to the CSF After the Ukraine and G-7 approval of the SIP in June 1997, the international community and the EBRD acted speedily and decisively. The G-7 countries and the EU immediately pledged the initial US$ 300 million at the Denver G-7 Summit and initiated preparation of an international pledging conference. The EU pledge amounted to US$100 million. This first pledging conference was held in New York in November 1997. Twenty five countries pledged some US$ 400 million including Ukraine’s US$ 50 million in-kind contribution. This sum was sufficient to undertake work on the first tasks of the SIP. The project started effectively in April 1998 with the setting up of the Project Management Unit (PMU). Council Decision 98/381/EC of 5 June 1998 (Ref. 2) concerning the Community contribution to the European Bank for Reconstruction and Development for the Chernobyl Shelter Fund provided the legal basis for the US$ 100 million Community contribution to the CSF pledged at the 1997 G7 summit in Denver. This was paid through contribution agreements with the EBRD from the TACIS financial envelope. It was paid in two instalments from the TACIS budget years 1998/1999 as follows: • 1st instalment: TACIS 1998, Contract 25746 - €50 million • 2nd instalment: TACIS 1999, Contract 26355 - €40.406 million Second Pledging Conference and related EC A second pledging conference was held in July 2000 in Berlin. Some US$ 320 million were pledged by 22 countries bringing the total amount pledged in the two conferences close to the estimated cost of US$ 768 million. The Community pledged a second contribution of €100 million which was approved by Council decision 2001/824/EC (Ref. 3). This was again paid through direct contribution agreements with the EBRD from the TACIS financial envelope. It was paid in four instalments from the TACIS budget years 2001 - 2004 as follows: • 1st instalment: TACIS 2001, Contract 26963 - €40 million • 2nd instalment: TACIS 2002, Contract 52259 - €20 million • 3rd instalment: TACIS 2003, Contract 83145 - €18 million • 4th instalment: TACIS 2004, Contract 115193 - €22 million Third Pledging Conference and related EC contributions In 2003 the PMU presented a revised schedule and a first cost estimate, based on the actual cost of completed projects and contract values for ongoing projects, amounting to some US$ 1,091 million. The EBRD, as manager of the Fund, warned that replenishment was needed if the new schedule was to be maintained. The latest estimate served as a basis for additional pledges by the donors in London in May 2005. The donors pledged in total an amount equivalent to about €181.5 million, including €22 million from Ukraine and, for the first time, €10 million from Russia. Taking into account the historical burden sharing, the Commission pledged an additional €49.1 million, bringing the Commission’s total contribution so far to the Fund to around €240 million. This latest pledge was again paid through direct contribution agreements with the EBRD from the TACIS and INSC financial envelopes. It was paid in four instalments from the TACIS and INSC budget years 2006 - 2009 as follows: • 1st instalment: TACIS 2006, Contract 131686 - €14.4 million • 2nd instalment: INSC AP2007, Part 1, Contract 146238 - €10 million • 3rd instalment: INSC AP2008, Part 1, Contract 159980 - €15 million • 4th instalment: INSC AP2009, Part 1, Contract 203253 - €9.7 million Fourth Pledge and related EC contributions At the meetings of the Assembly of Contributors in 2008 - 2010, the EBRD clearly informed the donors of the need for further additional funds to compensate for cost increases experienced in the implementation of the SIP due to delays, escalation and increases in the prices of labour and materials. It was, however, only in 2010 that the projects were sufficiently developed so that the Bank was in a position to present sufficiently reliable estimates on costs and completion schedule. By July 2010 the tendering of the NSC had been completed and the Contractor had been selected. The cost of the NSC was now clearer. The price of some commodities, such as steel, concrete and Ukrainian labour costs had also increased. According to the Bank´s estimates the SIP required an additional €600 million and the Interim Spent Fuel Storage Facility (financed through the Nuclear Safety Account – NSA – also managed by the EBRD) another €140 million for completion. In line with the historical burden sharing between donors contributing to the CSF, an additional contribution from the EU in the range of €100 - 125 million was expected to be required. In anticipation of the next pledging event the EC made two contributions to the CSF from the addendum to the INSC 2008 programme and form the INSC 2010 programme of €10.7 million and €17 million respectively. The pledging conference took place in Kiev on 19th April 2011, just 7 days before the 25th anniversary of the accident. There had been a previous agreement in principle for a contribution in the order of €400 million by the former G7 plus the Commission. The Commission contribution would be €110 million. However, the total of pledges by all donors at the pledging conference fell some €29 million short of the €550 million target above which the EBRD would contribute €190 million in order to reach the shortfall of €740 million for the two funds. In order to definitively close the funding issue of the Chernobyl projects, a number of G8 members and the Commission agreed to make complementary pledges.
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