Russia’s OMZ Announces Effort to Take Management Control of Slovakia’s Mochovce Nuclear Power Plant

On July 15, 2015, Czech engineering company Skoda JS, which is ultimately Russian controlled via its parent company, Russia United Heavy Machinery Plants (OMZ), expressed an interest in enhancing its role in Slovakia‘s Mochovce nuclear power plant project, where two new units are being built.  Skoda currently leads a consortium of five primary suppliers involved in commissioning key portions of the project worth some ‘‘‘520 million.  These include supplying the primary circuit, the process transport portion, internal connection pipelines and intermediate cooling systems.  Skoda‘s owner, OMZ, has announced that it is now seeking to be the primary coordinator of the entire ‘‘‘4.6 billion Mochovce nuclear project.

After years of criticism from Bratislava over the mismanagement of this project, Slovensk Elektr‘‘rne (and the company‘s majority owner, Italy‘s Enel), which currently own and operate the Mochovce NPP, seem open to the idea of OMZ taking this larger role at the plant.

Russia‘s interest in taking over the project comes at a time when SE‘s future is somewhat uncertain.  Enel has been trying to sell its 66% stake in the company for some time, with the most recent configuration of such efforts involving the sale of its stake in two tranches.  The first would see the Slovak government‘s 34% share increase to a majority holding, and the remainder would be sold to another undetermined entity.  Previous efforts by Rosatom to purchase the 66% stake were interdicted, due to concerns associated with undue Russian influence over the country‘s energy sector.

In this scenario, Skoda JS would likely gain management control, but not necessarily gain ownership of the plant.  Still, any Russian involvement at Mochovce would likely require the approval of Slovak Prime Minister Robert Fico.  Part of the temptation to move towards a Russian-controlled enterprise is related to growing frustration with the failures of the current management team.  Accordingly, given their nuclear expertise and the project‘s long delays and rising costs, the government may view strengthened Russian involvement favorably.  Such a decision, however, would undermine the strategic achievement of having blocked Rosatom‘s bid for SE previously.  In short, taking control of the management of Mochovce would still result in significant Russian influence over the power generation industry of the country and further enhance the position of Russian state-controlled companies in the country‘s largest scale infrastructure projects.

In its current state, Mochovce‘s two functioning units account for roughly 20 percent of Slovakia‘s energy needs.  The completion of the two new units, already long delayed, would bring an additional 880 MW of capacity to the plant.  Commercial operation of the first unit is expected to begin in November 2016, with the second coming online a year later (although an additional 3 to 4 month delay is rumored). The project‘s cost, initially put at ‘‘‘2.8 billion, has reached ‘‘‘4.63 billion, and could potentially get as high as ‘‘‘5.5 billion.

Skoda JS has been owned by OMZ since 2004.  OMZ‘s majority shareholder is Russia‘s Gazprombank CJSC, with an 84.244 percent share.  Gazprombank is a subsidiary of Russia‘s state-owned natural gas producer Gazprom.  OMZ‘s subsidiary companies, including Skoda, ‘‘‘are traditional suppliers of the main vessel equipment of the nuclear island for Rosatom.‘