The heavy debt with China to build Atucha III

Paradoxes of Kirchnerism. In less than a week, Alberto Fernández announced the pre-agreement with the Monetary Fund to restructure the debt for US$44.5 billion and traveled to Beijing with the contract already signed to build the Atucha III nuclear power plant, with Chinese technology and financing, which will involve for Argentina an extra indebtedness of US$12,000 million. That is, more than a quarter (27%) of that figure; in this case, a 20-year term with eight years of grace and 7% annual interest.

This ambivalence of the Government was relegated to the background or third level after the political uproar caused by the testimonial resignation of Máximo Kirchner to the leadership of the official bloc of deputies –where he maintains the bench and parliamentary privileges–, to mark his ideological disagreement with the negotiation with the IMF without knowing the fine print or fine numbers. And even more so after the presidential affirmation in Moscow that he aspires to depend less on the Fund and on the US, which suggests a change of financial dependency in favor of Russia and China more akin to the taste of Cristina Kirchner, at the cost of corroborating the lack of its own economic growth program.

All these disruptive ingredients promise to raise the political voltage of the treatment in Congress of the still uncertain agreement with the Fund. Above all, because the Chinese nuclear power plant project (almost “turnkey”) went through the last three governments and the heavy debt that its long-term financing implies will compromise the next five administrations from 2024. It is also likely to extend to the technical level, where several specialists have been discussing the timeliness, convenience, size and cost of the work for some time.

The construction of Atucha III, with 1,200 MW of installed power (equivalent to El Chocón) at the Atucha I and II complex in Lima, Zárate district, it will be the fourth nuclear power plant in Argentina (the remaining one is Embalse, with 648 MW, repowered in 2019). It was included in 2014 by the CFK government after the expansion of the strategic partnership with China sealed in 2004 by Néstor Kirchner as a link in the Asian giant’s geopolitics of expanding its influence in Latin America and Africa through large infrastructure works. Then it was reformulated by Mauricio Macri, until the credit crisis of 2018 stopped everything; and in the fall of 2021, the pandemic forced Alberto Fernández’s trip to Beijing to be postponed to reactivate the project, which takes place this weekend at the invitation of President Xi Jinping.

Its main feature is the Hualong Chinese technology reactor, with enriched uranium as fuel and light water as coolant and moderator, which will be used for the first time in Argentina and will also mark China’s debut as an exporter of this type of plant.

Although the 2014 agreement provided for the installation of two plants, the first of which –of 760 MW– had to use a reactor with natural uranium and heavy water to take advantage of Argentine experience and resources, in the review arranged in 2018 it was announced that the construction of both was suspended due to their high cost for the situation in the country. But a year later, Macri decided to move forward with the Hualong, which since 2020 has led to renewed pressure from the Chinese government. In the meantime, the natural uranium reactor (Candú, of Canadian technology) was ruled out due to its high cost, having stopped manufacturing and because China did not take responsibility for the risk, explains Julián Gadano, former Undersecretary of Nuclear Energy of the Nation. between the end of 2015 and 2019. In addition, considers that the Atucha III project is “loose of papers”. For example, the legal framework obliges it to have a financing contract (which in the case of Chinese commercial banks is subject to the Argentina-IMF agreement) and to establish objective parameters for direct contracting, with an opinion from the Sigen (General Sindicatura of the Nation) on prices and rates, which until now is unknown.

In fact, a document from the Ministry of Energy prepared six months ago anticipated the start of works for 2024; that is, during the next government.

Instead, the official statement issued this week after the virtual signing of the contract between the director of the state-owned Argentine Nuclear Power Company (NA-SA), José Luis Antúnez, and the president of the Chinese National Nuclear Corporation (CNNC), Yu Jianfeng points out that the construction works will begin at the end of this year, will require the creation of more than 7,000 jobs and an approximate integration of 40% of national suppliers. It also indicates an investment of more than US$8 billion for the provision of the engineering, construction, acquisition, start-up and delivery of the reactor, but without specifying the sources, costs and terms of the Chinese financing.

This last issue is another reason for debate at a technical level. In a presentation to specialists in September 2021, the Argentine physicist Alfredo Caro (former manager of the Balseiro Institute and current professor at George Washington University), calculated in US$12,000 million the total cost of the project, computing the longest execution times before generating electricity and the financial cost at a 20-year term with an annual interest rate of 7%.

According to this analysis, after the eight-year grace period, the difference between the sale of energy and the amount of the credit repayment (plus operation and maintenance expenses) will increase Argentina’s public debt by US$1.3 billion in each of the 12 years. remaining. And, in addition, it will overlap with the payments of the 2020 debt swap with private creditors. At the same time, in that period the generation cost of Atucha III would be equivalent to US$220 per MWh, to be reduced to US$50 in the following 48 years (similar to the current cost of nuclear energy) and average US$82 in the 60 useful life. of the plant (US$20 more than the average of all electricity generation).

Caro maintains that, in the current energy transition, the alternative is to follow the global trend of bidding for the purchase of modular reactors with lower power and cost (SMR), which use enriched uranium and open the possibility of private investment. . Gadano agrees with this point and with the recommendation to concentrate public investment on the delayed local development of the CAREM reactor, in the prototype stage (with 5% enriched uranium), to turn it into a commercial model that can be exported at competitive costs. He also points out as another priority to strengthen Invap to increase the production of multipurpose nuclear reactors that do not generate electricity but radioisotopes for medical use and have made Argentina the world’s leading exporter, with sales to Peru, Algeria, Egypt, Australia and the Netherlands. .

As usual and regardless of all these issues, the official statement qualifies the contract with China for Atucha III as a “historic event” and highlights that it will allow Argentina’s nuclear capacity to be expanded “thanks to the transfer of technology for the manufacture of fuel elements” . However, there is no lack of those who believe that the anticipated signature last Tuesday was a previous demand from the Beijing government to receive Alberto Fernández this weekend.

There was also no lack of political marketing on the local screen of the virtual ceremony with Chinese officials. For example, Axel Kicillof justified his presence in that the plant will consolidate the province of Buenos Aires “as the one with the most weight in terms of energy and nuclear power in the Argentine Republic.” More striking was the participation of Sergio Berni and his wife, Agustina Propato, current national deputy and future candidate to run for mayor of Zárate, whose interim community chief was not invited.

[email protected]

–