Suspicions that ČEZ is hiding its real reasons for choosing CEEI behind the firm's now defunct relationship with GNS are hard to resist.

Bear with me, patient reader! It has taken a couple of days to decipher the statements about CEEI made by the press spokesmen at ČEZ and GNS, Europe’s leading manufacturer of casks for spent nuclear fuel headquartered in Essen, Germany. You will recall that CEEI is the firm selected by ČEZ in 2008 to plan and build its spent nuclear fuel facility at NPP Temelín.

In an earlier blog (see The Appian Loop), I identified four reasons for doubting the transparency of ČEZ’s choice of CEEI. Briefly, these are the great difference in the cost of the Czech facility compared with its Bavarian equivalent; the impenetrable secrecy surrounding the ownership of the company; the alleged financial links between CEEI’s former Liechtenstein-registered owner and Appian, uncovered apparently by the Swiss criminal police and referred to in MF Dnes; and the profile of the managing director of the firm, the lawyer Jiří Kovář. (Some readers might remember Kovář from the early 1990s when he was the deputy chairman of ODS. He was forced to resign as the head of the office of government under Prime Minister Klaus in July 1993 after being accused of blackmailing his opponents within ODS. Apart from being a specialist in spent nuclear fuel facilities, Kovář is also a keen golfer, like so many successful local entrepreneurs. Last year, he failed to be elected president of the Czech Golf Federation.)

A fifth reason has emerged over the last few days. It is the discovery that CEEI appears to be misrepresenting the nature of its business relations with GNS and its subsidiary WTI. And more significant still is the possibility that ČEZ is part of this misrepresentation. Let me explain.

This week, ČEZ stated that "CEEI qualified for the tender thanks to its cooperation with WTI (a license agreement between CEEI and WTI dated April 13 2007 is one of the attachments to the contract)." Earlier, ČEZ had stated that CEEI held "an exclusive license from GNS and WTI for the delivery of interim storage facilities built in countries east of Germany."

Statements from GNS cast a different light upon the matter. In a written reply to the press last week, GNS said that "in the planning phase of the interim storage project at NPP Temelín, there were discussions with CEEI about the licensing of an interim storage design developed by WTI, the GNS subsidiary." But, it further explained, "ČEZ assigned the planning and erection of the interim storage facility to CEEI on the basis of a different design developed and approved in the Czech Republic. Due to this decision by ČEZ, there was no need for a license from WTI. And so the cooperation with CEEI was terminated."

This statement does not inspire confidence in the veracity of CEEI’s much vaunted claim to enjoy a 'regional partnership' with GNS and WTI, a claim plastered all over its website today. Misleading marketing is one thing. More significant is that GNS’s understanding of the matter alters the meaning of what ČEZ is telling journalists. ČEZ states that the decision to switch from the German to a Czech design occurred when, "in the course of the work CEEI, supported by experts from WTI, found that the adaption of the German project to the Czech environment would take longer than expected. And so ČEZ agreed to a change in the technical solution of the storage facility, which enabled it to meet the required deadline."

This implies that the switch in design was made after the contract was awarded to CEEI. However, GNS’s statement ( "…there were discussions with CEEI about the licensing of an interim storage design developed by WTI. But ČEZ assigned the planning and erection of the interim storage facility to CEEI on the basis of a different design developed and approved in the Czech Republic. Due to this decision by ČEZ, there was no need for a license from WTI…" ) suggests that the switch in design was decided before the contract was awarded to CEEI.

In summary then:

CEEI’s relationship with GNS, which revolved around discussions over the licencing of GNS’s design in the Czech Republic to CEEI, ended the moment ČEZ decided to switch from a German GNS design to a Czech design of its planned spent nuclear fuel facility at NPP Temelín.

ČEZ states that it selected CEEI because CEEI had a licence to work with the GNS design and that, having once selected CEEI because of this licence, which formed a part of the contract between itself and CEEI, it switched to a Czech design better suited to its needs. And stuck with CEEI.

GNS implies that its relationship with CEEI ended before ČEZ selected CEEI and this because its own design was not suited to ČEZ’s needs.

If the reason for appointing CEEI was its licence to work with the German design, and that design was passed over in favour of a Czech design before CEEI was appointed (if GNS's version of the sequence of events is to be believed), should this not have reduced CEEI's appeal for ČEZ? And even if the decision to drop the German design was made after the appointment of CEEI, would this not have affected the terms of the contract with CEEI, which included the licence agreement between CEEI and WTI? Recall ČEZ's precise words: "CEEI qualified for the tender thanks to its cooperation with WTI (a license agreement between CEEI and WTI dated April 13 2007 is one of the attachments to the contract)."

Suspicions that ČEZ is hiding its real reasons for choosing CEEI behind the firm's now defunct relationship with GNS are hard to resist. Such suspicions could be dismissed if only we could be sure that CEEI and the management of ČEZ were unrelated parties. But until the majority shareholder in ČEZ orders an independent audit of this transaction, doubts about the transparency of the contract between CEEI and ČEZ will remain.