Experts fear rise in costs, government and contractor confident of no cost hikes
While the Ukraine – Russia war heats up and the construction of the Russian-built Rooppur Nuclear Power Plant (NPP) remains far from complete, concern is rising that the project could be delayed or see cost overruns.
Western sanctions on Russia and the exclusion of seven Russian banks from the SWIFT network on March 12 are widely seen as the beginning of a protracted economic war that could cause global trade disruptions.
Despite sanctions and bans on Russian raw materials, oil and other energy, and financial institutions, ROSATOM, the state atomic energy corporation of the Russian Federation said: “No disruption is foreseen in any of the commitments and work schedules in the construction of the Rooppur Nuclear Power Plant.”
The situation remains fluid. Bloomberg has reported that the Biden administration was mulling sanctions against ROSATOM.
Since ROSATOM is a major supplier of fuel and technology to power plants around the world, experts anticipate that the price of raw materials and equipment will rise, in turn increasing manufacturing costs.
“All the equipment of Rooppur Nuclear Power Plant, including machinery and tools, are manufactured at different factories in Russia,” explained Dhaka University nuclear engineering professor Dr Md Shafiqul Islam.
According to him a Western ban on oil and raw materials and sanctions of financial institutions will delay the manufacturing process. Moreover, implementation costs will likely rise if the price of raw materials increases due to delays caused by the war.
“I can’t imagine that Russia would implement the project – bearing a loss – without revising the deal,” he said.
Bangladesh University of Engineering and Technology (Buet) Institute of Nuclear Power Engineering Assistant Professor Abid Hossain Khan echoed the sentiment, saying: “If transport and raw material costs go up gradually, there is a possibility of increasing implementation costs.”
Experts said that even if costs do not rise, there is concern over the compromised quality of work for the over 50 types of equipment manufactured at Russian factories.
But ROSATOM, in a statement to the Dhaka Tribune, reiterated that implementation of the project was on track: “In 2021, the dome of the inner containment was assembled at Unit 1, the Reactor Pressure Vessel and reactor plant equipment were installed. In February of the current year, welding of the reactor coolant pipeline was completed. Deaerator has been installed in the machine room.
The statement continues: “Installation of the polar crane was completed at Unit 2 in November 2021. The Reactor Pressure Vessel and steam generators are scheduled to be mounted by the end of the current year.”
The Russian firm added: “Construction of a training center for training of the operational personnel of the Rooppur NPP is at its final stage. Active works are currently underway on installation of the key thermal and mechanical, electrical equipment, process pipelines.
“All operations are being carried out on schedule; the project will be implemented in accordance with previously approved plans.”
Despite ROSATOM’s assurance of no disruption, the government expects some disruption if the conflict lingers.
Speaking to reporters at a meeting in the first week of March, Planning Minister MA Mannan said there might be some indirect effects on the project if the war continues.
A science and technology ministry official, who asked not to be named, told the Dhaka Tribune that since the situation in Europe was uncertain: “The government will assess the situation if the war lingers for two more weeks.”
But he dismissed any possibility of implementation costs rising, saying: “There is no scope to increase the expenditure of the main contract of the project as per the deal.”
Responding to queries about quality being compromised even if costs do not rise, an official concerned said that a government technical committee inspects the equipment and machinery before shipment.
“Once the technical committee issues a clearance certificate, then the contractor can ship the equipment to Bangladesh,” he said.
The government is confident that the implementation costs of the project will not rise despite the situation.
According to people familiar with the matter, the project is being implemented following an EPC contract where the contractor holds the responsibility for engineering (including design), procurement and construction (EPC), commissioning to hand it over on time and within the budget.
Under the EPC contract, the Bangladesh government has not spent a single penny yet. On the other hand, Russia has not spent any amount in Bangladesh as the equipment for the project is being manufactured in Russia.
Moreover, Russian employees can draw 70% of their salary from Russia despite working here in Bangladesh.
“There is no scope to increase the expenditure of the main contract of the project as per the deal,” said a top official of the project.
“There are 16 contractors working to implement the project, and all of them are Russian firms appointed by ROSATOM. The contractor gets the bill directly from ROSATOM,” he added.
Moreover, the government has slashed the development allocation for the project by around 20% in the revised budget for the current fiscal year.
In a meeting, the National Economic Council approved the revised budget of Tk14,836 crore for the project for FY2021-22 cutting it down from Tk 18,426 crore.
According to the latest IMED report, Tk18,426 crore has been allocated for the project for the current financial year but until December 31, below 25% has been spent.
The Rooppur Nuclear Power Plant is the largest infrastructure project in Bangladesh, being constructed with the help of Russia which covenanted to invest $11.38 billion – over 90% of the total cost – by December 2025.
The government approved the Rooppur nuclear power plant in Pabna’s Ishwardi Upazila at an estimated cost of Tk113,093 crore on December 5, 2016.
The plant is expected to supply clean electricity at a cheap rate over its 60-year lifetime.