The privatization of Argentina's nuclear power plants could wipe out all bidders unless the government subsidizes the sale.
IN 1994, WHEN THE GOVERNMENT OF CARLOS Menem began the process of privatizing Genuar--two completed nuclear power plants and one under construction--it hoped to raise some $600 million. But a series of setbacks forced delays. Now, five years later, Argentine officials are at it again, and the task promises to be no less difficult.
"Not only are they not going to make any money these days, they're going to have to subsidize the project to the tone of $200 million or $300 million for anyone to take it," says Hugo Palamidessi, a representative of the Asociacion de Profesionales de la Comision Nacional de Energia Atomica (National Nuclear Energy Comission's Professional Association).
What happened? From the get-go, the sale of nuclear power plants threatened to be an arduous job. There has been only one similar privatization effort worldwide. And in Argentina, the process has been complicated even more by the deregulation and privatization of the electric-power sector, which has led to sharply lower prices for electricity. Palamidessi adds: "The way things are set up, privatization is not good business, either for the state or for private industry."
According to the new privatization plan, the nuclear plants, which generate 12% of Argentina's electricity, will be offered up at auction mid-year, carrying no base price and the obligation to maintain and operate the plant for the rest of its service life.
A $2-billion white elephant. Two of the three plants--Atucha I, capable of generating 357 megawatts, and Embalse, 648 megawatts-became operational in 1974 and 1984, respectively. The third plant, Atucha II, will be able to generate 745 megawatts when it goes online.
This is where the biggest problem arises. Whoever wins the bidding will need to raise more than $700 million to complete Atucha II, located north of Buenos Aires. Construction began in 1982, and with a price tag so far of $2 billion, it is considered a white elephant. About 80% of the work has been done, and completion is expected to take another six years.
The company that assumes control of the plants will have to pay the government an annual tax and deposit enough funds to cover expenses such as decommissioning the plant at the end of its service life.
Finally, even though the government will sell off 90% of Genuar, it will continue to have a say in major...