European Scrutiny Committee Contents

8   Chernobyl Nuclear Power Plant




+ ADD 1

COM(04) 481




+ ADD 1

COM(07) 825

Third Progress Report on the implementation of the Chernobyl Shelter Fund December 2003 and Commission Staff Working Document

Fourth Progress Report on the implementation of the Chernobyl Shelter Fund September 2007 and Working Document

Legal Base
DepartmentEnergy and Climate Change
Basis of considerationMinister's letters of 31 December 2010 and 11 February 2011
Previous Committee ReportHC 16-x (2007-08), chapter 7 (30 January 2008)
To be discussed in CouncilTo be determined
Committee's assessmentPolitically important
Committee's decision(a) Cleared

(b) Cleared (decision reported on 30 January 2008), further information now received


8.1  Following the accident of 26 April 1986, the shelter enclosing the remains of the Chernobyl Nuclear Power Plant Unit 4 was constructed rapidly and under extremely hazardous conditions. It was not intended to be a permanent solution, and in 1997 the G7 Denver Summit established the Chernobyl Shelter Fund (CSF: managed by the European Bank for Reconstruction and Development, funded by 28 national donors and the European Commission), which in turn, and with the involvement of international experts, led to a multidisciplinary construction management programme, designated the Shelter Implementation Plan (SIP), and to be financed by the CSF.

8.2  The SIP envisaged remedial work directed towards making the Shelter physically stable and environmentally safe. There were five major goals:

  • reduce the potential for collapse of the Shelter;
  • reduce the consequences of the Shelter's collapse, should one occur;
  • improve the nuclear safety of the Shelter;
  • improve the safety of workers and environmental protection at the Shelter; and
  • make the site environmentally safe.

The Third Progress Report

8.3  Council Decisions 98/381/EC and 2006/908/EC concerning the Community's contributions to the EBRD for the CSF requires the Commission to submit progress reports on its implementation to the European Parliament and the Council. Such reports were thus submitted in October 1999, September 2001 and December 2003.

8.4  When the previous Committee considered the Third Progress Report on 11 October 2006, it noted that, while the first two Reports had illustrated steady progress in the early stages of a costly long-term programme, that third Report (which its predecessors had first considered in September 2004) highlighted some major challenges at what was clearly a crucial stage — significant cost increases, funding uncertainties and suggestions of inadequate responses on the part of the Ukrainian authorities. They therefore asked the then Minister to provide his views on these unresolved issues, and continued to hold the document under scrutiny.[33]

8.5  It was against this background that, at that meeting, the previous Committee also considered a Council Decision to pay the first instalment of the €49.1 million (then £33.6 million) Third Community Contribution to the CSF, amounting to €14.4 (then £9.8) million. In his accompanying Explanatory Memorandum, the then Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) explained that the Community pledge formed part of a further €173 (then £118.6) million that major donors had so far pledged and was intended to be paid over 2006-2009; that it would be committed and paid from the dedicated CSF line in the 2006 EU budget; that the balance €34.7 (then £23.8) million would be paid over 2007-2009 and would be subject to a new Council Decision; and that the UK share of the Community contributions was 17.5%.

8.6  He also noted that the Government was an important donor to the CSF and strongly supported this proposal for Community funding; described the work funded by the CSF as essential, new and extremely challenging; said that implementation of the range of tasks to be executed over a period of approximately 10 years under the SIP "will require tight management to prevent further cost and time over-runs"; and, describing the EBRD as "a strongly performing organisation that works to high environmental standards", said that he was "confident that it is well placed to manage funding for this complex issue".

8.7   For their part, our predecessors found it disturbing that, 18 months after the previous Minister's earlier letter, the picture remained very much as it was then, with continuing uncertainties about costs, funding and the contribution of the Ukrainian authorities. They nonetheless accepted the importance of upholding the Community's commitments towards a self-evidently important project, and accordingly cleared the decision.

8.8  But they also asked the Minister to let the Committee know, before the end of 2006, the outcome of the three "separate but linked problems" that he had outlined, and the consequences for costs and funding, both generally and for the UK, and for his assessment then of the contribution of the Ukrainian authorities; and in the meantime retained the Third Progress Report under scrutiny.[34]

8.9  Although it now seemed that a further letter to them had been signed on 3 January 2007 by the then Parliamentary Under-Secretary of State at the then Department for Trade and Industry (Lord Truscott), it was never received by the previous Committee. In the meantime, they received the Fourth Progress Report.

The Fourth Progress Report

8.10  The then Minister (Malcolm Wicks) welcomed the Report and professed continuing commitment "to the international effort to carry out remedial work on the Chernobyl Shelter directed towards making it physically stable and environmentally safe." He said that the then Government had been actively involved in negotiations with the EBRD and other donors on the implementation of the SIP and shared the Commission's concerns on the delays and cost overruns experienced. He welcomed the progress made in 2007 towards resolution of the contractual, political and financial problems that had caused turbulence in the programme. As the report stated, following successful conclusion of the key contract negotiations, there was now widespread agreement amongst donors, the EBRD and Ukraine that additional funding would be required. As of end-June 2007, the CSF has recorded total contributions of €739 (then £541.9) million from international donors. To date the UK had contributed €47 (then £34) million to the SIF; other major donors' contributions thus far had been (then €/£ equivalent) — Germany €60 (£44) million, France €41 (£30) million, Japan €41 (£30) million, EU €204 (£149) million, US €138 (£101.2) million, Canada €34 (£24.9) million, Russia €9 (£6.6) million. Negotiations were currently underway amongst major donors on burden sharing arrangements and the then Government had indicated that it was prepared to make an additional financial contribution as part of an established fair burden sharing arrangement. The current estimate was that an additional €130 million (£95.3million) would be required from donors to complete construction of the shelter, although it had to be stressed that this was an estimate which would only be better refined as the detailed design process proceeded

8.11  He concluded by saying that, given the ongoing UK financial commitment and the difficulties the fund had experienced, the then Government intended "to continue to monitor progress on implementation very closely."

The previous Committee's assessment

8.12   In clearing the Third and Fourth Progress Report, the previous Committee noted that, whether the "sound management, political commitment and stability in Ukraine" deemed essential by the then Minister was forthcoming or not, in the meantime at least another €130 million would be required from, inter alia, the EU and the UK. However, given the passage of time and the unsatisfactory nature of the Department's follow-up to its requests, the previous Committee found itself unclear as to what the total estimated cost now was — the €850 million cited by the then Minister in July 2006, plus this further €130 million, or a larger figure; and whether this included the €50-70 million by which the bids from prospective contractors exceeded estimates at that time.

8.13  The previous Committee also noted that a further Council Decision was now due regarding the present Third Community Contribution. They said that they were content to wait until it is submitted for scrutiny, but at that time would be grateful if the Minister would concisely and clearly summarise:

—  what the estimated cost of the New Safe Confinement then was;

—  what the actual and committed level of funding was to the CSF;

—  what the actual and prospective UK contributions were;

—  what the actual and prospective Community contributions were;

—  how much each of the other donors had provided and was committed to provide.

8.14  In the meantime, they cleared both the Third and Fourth Progress Reports, the latter with the proviso that the above information was provided when the relevant Council Decision was submitted for scrutiny.[35]

The Minister's letter of 31 December 2010

8.15  The Minister of State at the Department of Energy and Climate Change (Charles Hendry) begins his letter by saying that he very much regrets that it has not been possible to provide adequate answers to the previous Committee's request until now. This, he says, is due to the failure of the major contractor for work funded by the CSF, the Novarka consortium, to provide a cost estimate for the CSF-funded New Safe Confinement (NSC) project. Strong representation by his officials and the representatives of other major donors to both the EBRD and Novarka have, however, resulted in donors being provided with an assessed cost estimate in October 2010, which he says now enables him to answer all of the previous Committee's requests, as follows:


"The main contractor for the New Safe Confinement (NSC) work, the Novarka consortium, estimates that the cost of the NSC will be €990.7 million. Taking into account the estimated costs of other works under the Chernobyl Shelter Implementation Plan (SIP), funded through the EBRD-managed Chernobyl Shelter Fund (CSF), plus allowances for risk and escalations, the overall cost to implement the SIP is €1.594 billion.


"To date the Fund has received €793 million and an amount €23 million is still outstanding against existing Contribution Agreements. A few donors have made pledges for further contributions to the CSF without entering into contribution agreements. These pledges amount to €3.5 million. The EBRD has entered into a Grant Agreement with Chernobyl Nuclear Power Plant (ChNPP) which provides € 58 million to the NSC project. While this grant is not part of the CSF the amount can be taken into account to provide an overview of available and required funds. The EBRD has also decided that any interest income generated by this grant amount will be used for the New Safe Confinement. The Fund has to date generated an interest income of €102 million and the EBRD grant €350,000. Taking these sources of income together and without any further contributions the CSF can provide a maximum overall funding of €990 million. In order to complete the SIP program a further €604 million will therefore be required.


"UK contributions to the CSF to date total US$16,820,000 and £25,930,000, equating to a total of €55,446,512 received in the CSF. Discussions between G8 members and other international donors on future contributions to the CSF are ongoing and it is not possible at this moment to judge what future UK contributions may be. These figures include a UK contribution to the CSF of £3,800,000 (€4,800,000) made in April 2008, subsequent to the 2007 international CSF pledging round, and it is our expectation that 2008 contribution will be counted as an advance contribution in any future pledging round. The Government of Ukraine has stated that it wishes to host events, including a pledging conference, connected with the 25th Anniversary of the Chernobyl Accident in April 2011.



"Attached to my letter is a table,[36] provided by the EBRD, showing contributions to the CSF as at 30 September 2010. This includes Community contributions to date. Since discussions between potential donors on future contributions to the CSF are ongoing, it is not possible at this moment to judge what future Community contributions may be."

The Minister's letter of 11 February 2011

8.16  The Minister writes further to his letter of 31 December 2010 to provide information that he says the Committee may find useful in order to understand why no further Council Decisions concerning the third contribution EBRD for the CSF have been submitted for scrutiny, as follows:

"While the first instalment of the third Community contribution to the EBRD for the CSF was made following a Council Decision in December 2006, all subsequent instalments, totalling an additional €34.7 million under the third Community contribution plus an additional €10.7 million in advance of future CSF pledging rounds, have been made using Community funds allocated to the Instrument for Nuclear Safety Cooperation (INSC). The INSC was established through the Council of the European Union's Council Regulation (Euratom) No 300/2007 of 19 February 2007.

"The general objective of the INSC is to finance measures to support the promotion of a high level of nuclear safety, radiation protection and the application of efficient and effective safeguards of nuclear material in third countries. The financial reference amount for implementation of the INSC over the period 2007 to 2013 is €524 million.

"Under the rules laid down in Council Regulation (Euratom) No 300/2007, the European Commission, which implements the INSC, submits multi-annual strategy papers, indicative programmes and annual action programmes for INSC activities, including contributions to the CSF, to an INSC Committee composed of representatives of the Member States, and chaired by a representative of the Commission, for approval. Officials from my Department represent the United Kingdom on the INSC Committee. This approval process does not require a Council Decision for each instalment of the contributions to the CSF, although the Commission is required to report annually to the Council and the European Parliament on the implementation of assistance through the INSC. For this reason there have been no Council Decisions on Community contributions to the CSF for the Committee to scrutinise subsequent to the first instalment of the third Community contribution in December 2006."


8.17   It seems extraordinary that it has taken three years to provide the information requested and that, even now, it is not possible for the Minister to judge what future EU contributions may be. But that is for others, rather than us, to pursue, should they so wish.

8.18  We presume that, being inter-institutional, the progress report on implementation to which the Minister refers will be deposited for scrutiny.

8.19  In the meantime, we report this further information to the House in order to complete the scrutiny process thus far.

Annex 1 — 8 October 2010

Contributions to the Chernobyl Shelter Fund as at 30 September 2010


in currency
Contributions EUR equivalent

(as per CSF

Rules) *

Effective EUR
received) **
AustriaEUR 7,500,000 7,500,000 7,500,000
BelgiumBEF 24,000,000
BelgiumEUR 3,694,000 4,288,944 3,691,941
CanadaUSD 32,200,000
Canada (Note 1)USD 800,000
CanadaCAD 8,000,000 34,925,491 36,468,891
DenmarkEUR 2,500,000
DenmarkDKK 18,500,000 4,967,917 4,988,643
ECEUR 250,206,000 250,206,000 250,206,000
FinlandEUR 4,880,000 4,880,000 4,880,000
FranceEUR 52,470,000 52,470,000 51,804,018
GermanyUSD 23,610,000
GermanyEUR 39,225,000 60,485,693 48,943,174
GreeceEUR 5,000,000 5,000,000 3,537,562
IrelandEUR 8,020,925 8,020,925 8,020,925
ItalyUSD 16,820,000
ItalyEUR 26,320,002 41,466,332 41,646,729
JapanUSD 50,799,483 45,744,694 46,454,527
KuwaitUSD 6,000,000 5,402,972 5,414,835
LuxembourgEUR 2,500,000 2,500,000 2,500,000
NetherlandsNLG 6,000,000
NetherlandsEUR 3,000,000 5,707,337 5,688,172
NorwayUSD 5,000,000
NorwayNOK 20,000,000 6,976,254 7,109,359
PolandEUR 1,598,290
PolandUSD 1,001,350 2,500,001 2,445,456
Russian Federation USD17,000,000 15,308,420 8,087,075
SpainUSD 3,031,433
SpainEUR 2,350,000 5,079,791 5,362,635
SwedenEUR 2,500,000
SwedenSEK 40,000,000 7,154,681 6,742,451
SwitzerlandEUR 5,000,000
SwitzerlandCHF 7,000,000 9,305,043 9,543,996
Ukraine (Note 2)USD 50,000,000 45,024,764 10,136,098
UKUSD 16,820,000
UKGBP 25,930,000 53,122,312 55,446,512
USAUSD 191,200,000
USA (Note 3)USD 11,800,000 182,800,540 163,066,538
Total : 860,838,112 789,685,537
Donors (Note 4)
IcelandUSD 10,000 9,107
IsraelUSD 250,000 280,710
KoreaUSD 400,000 381,143
PortugalUSD 200,000 169,205
Slovak Rep.EUR 2,000,000 2,000,000
SloveniaUSD 300,000 320,555
Total: 3,160,720
Grand Total: 792,846,257


  1. Canada's contribution includes USD 0.8 million (Euro 720,396) of bilateral assistance for the SIP.
  2. Consists of cash contribution and in-kind contribution. Yearly appropriations to be confirmed following reconciliation. In addition, at the May 2005 pledging event, Ukraine declared it will assume responsibility for the SIP task "deconstruction of unstable parts" which is valued at USD 22 million.
  1. USA's contribution includes bilateral assistance for the SIP in the amount of USD 1t8 million (Euro 10,625,844).
    1. According to CSF Rules Section 2.06. Donations made in currencies other than EUR will be recorded in EUR at the relevant rate of exchange at the date of receipt.


* Historic rates as per CSF Fules: BEF: 40.3399 / CAD: 1.5358 / DKK: 7.4962 / NLG: 2.2162 / NOK: 8.0848 / SEK: 8.5935 / CHF: 1.6260 / GBP: 0.6828 / USD: 1.1105

** Actual received, and if applicable, exchanged at date of receipt — excluding in-kind contributions.

33   See HC 42-xxx (2003-04), chapter 5 (9 September 2004). Back

34   See (27610) 10669/06 and (25839) 11544/04: HC 34-xxxvii (2005-6), chapter 12 (11 October 2006). Back

35   See headnote: HC 16-x (2007-08), chapter 7 (30 January 2008). Back

36   Reproduced at Annex 1 to this chapter of our Report. Back

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