Nuclear Safety: U.S. Assistance to Upgrade Soviet-Designed Nuclear
Reactors in the Czech Republic (Letter Report, 06/28/95,
GAO/RCED-95-157).

GAO provided information on: (1) the reasons the Export-Import Bank
(Eximbank) guaranteed a loan for the Temelin nuclear power plant in the
Czech Federal Republic; (2) actions Eximbank took to ensure the
project's soundness and safety; and (3) issues involving the U.S.
government's potential liability as a result of the loan guarantee.

GAO found that: (1) U.S. government officials believe that Western
technology can make the Soviet-designed Temelin reactors safer, provide
more than $330 million in U.S. export earnings, and contribute to
international economic goals; (2) U.S. experts concluded that the least
safe Soviet-designed reactors should be shut down as soon as possible
and that other reactors should be upgraded to acceptable safety
standards; (3) Eximbank evaluated the project's technical and commercial
feasibility, capital cost and schedule estimates for the project, and
the project's environmental effects; (4) the National Security Council
confirmed for Eximbank that the Czech nuclear regulatory body met
applicable criteria for regulatory competence; and (5) Eximbank
concluded that there was only a remote chance that it would be held
liable for damages in the event of a nuclear accident at Temelin.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-95-157
     TITLE:  Nuclear Safety: U.S. Assistance to Upgrade Soviet-Designed 
             Nuclear Reactors in the Czech Republic
      DATE:  06/28/95
   SUBJECT:  Nuclear reactors
             Technical assistance
             Government guaranteed loans
             Nuclear powerplant safety
             Technology transfer
             Foreign loans
             Government liability (legal)
             Off-budget federal entities
             Exporting
             Financial analysis
IDENTIFIER:  Temelin Nuclear Power Plant (Czech Republic)
             Czech Federal Republic
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Committee on Commerce, House
of Representatives

June 1995

NUCLEAR SAFETY - U.S.  ASSISTANCE
TO UPGRADE SOVIET-DESIGNED NUCLEAR
REACTORS IN THE CZECH REPUBLIC

GAO/RCED-95-157

Temelin Nuclear Reactor


Abbreviations
=============================================================== ABBREV

  CEZ - Ceske Energeticke Zavody Koncern
  DOE - Department of Energy
  IAEA - International Atomic Energy Agency
  NRC - Nuclear Regulatory Commission
  NSC - National Security Council
  VVER -
  SKODA -

Letter
=============================================================== LETTER


B-261096

June 28, 1995

The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

Dear Mr.  Dingell: 

On March 10, 1994, the Export-Import Bank of the United States\1
approved a decision to guarantee a loan of $317 million for the work
performed by Westinghouse Electric Corporation on the Temelin nuclear
power plant in the Czech Republic.  The U.S.  government's strong
support of the Bank's loan guarantee facilitated the first attempt to
integrate Western technology into a Soviet-designed VVER 1000
pressurized water reactor.  U.S.  officials saw the opportunity to
gain more than $330 million in U.S.  exports and to make the reactors
safer, but the government of Austria, a neighbor of the Czech
Republic, and some Members of Congress expressed concern about the
safety of the Soviet-designed reactors and the extent of potential
U.S.  liability in case of a nuclear accident. 

To address concerns about the safety and potential liability of the
project, this report provides you with information on (1) the reasons
for the Export-Import Bank's loan guarantee for the Temelin nuclear
power plant; (2) the actions the Export-Import Bank took to ensure
the soundness of the project, including the project's safety; and (3)
issues involving the U.S.  government's potential liability as a
result of the Export-Import Bank's loan guarantee. 


--------------------
\1 The Export-Import Bank is the U.S.  government agency that helps
finance export sales of American goods and services.  In its 60 years
of operation, the Bank has used loan, guarantee, and insurance
programs to support more than $290 billion in U.S.  exports. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

U.S.  government officials believe that Western technology can make
the Soviet-designed Temelin reactors safer as well as provide more
than $330 million in U.S.  export earnings.  As a result, U.S. 
officials strongly supported U.S.  industry's participation in the
Temelin project and worked with Westinghouse and the Czech government
to help bring about the acceptance of a U.S.  firm for the project. 
Furthermore, after the Export-Import Bank had approved a preliminary
commitment, the U.S.  Embassy assured Czech officials that if awarded
the contract, Westinghouse would have access to competitive financing
through the U.S.  Export-Import Bank for the instrumentation and
control systems and the specially designed nuclear fuel developed for
the Temelin reactors.  U.S.  officials believe that without the U.S. 
government's support, Westinghouse would not have acquired the
contract because competing foreign bidders were supported by their
governments. 

To determine whether the project complied with the administration's
policies--particularly U.S.  environmental policy--and to draw on the
administration's expertise, the Bank's Chairman requested guidance
from the National Security Council, which conducted an interagency
review of the safety of the reactors' design and of the technical
capabilities of the Czech regulatory authorities.  The established
process for an interagency review of applications for financing
nuclear exports did not apply because the Temelin project was unique
in that the proposed Westinghouse contract covered only the reactors'
instrumentation and control system as well as the initial nuclear
fuel for the plant.  The standard environmental review procedures--as
required of U.S.  agencies to further the purposes of the National
Environmental Policy Act abroad\2 --apply only to exports of a
complete nuclear production or utilization facility or a nuclear
waste management facility, not to the components of systems.  The
results of the National Security Council's review and the engineering
and environmental evaluation by the Bank's nuclear engineer satisfied
the Bank's Board of Directors, and the loan guarantee was approved. 
However, Bank officials recognized the shortcomings inherent in the
complicated and unprecedented review of the Temelin project and are
in the process of drafting review procedures that incorporate
expertise from other agencies to address future exports of this type. 
At the time of our review, however, these procedures had not been
completed. 

The Bank's Office of the General Counsel examined the question of
whether the Bank, since it is guaranteeing a loan for equipment and
nuclear fuel to complete the reactors, could be held liable for
damages in the event of a nuclear incident at the Temelin plant.  The
Bank's General Counsel concluded that the chances are small that the
Bank would be held liable in any court for damages.  This conclusion
was based on an analysis of the Vienna Convention on Civil Liability
for Nuclear Damage, proposed Czech law, the domestic law of the
United States and other countries, and international law.  On the
basis of the Bank's analysis and supporting documentation, we believe
that the Bank's decision is reasonable. 


--------------------
\2 Executive Order 12114 entitled "Environmental Effects Abroad of
Major Federal Actions" specifies the actions to be taken by federal
agencies to further the purposes of the National Environmental Policy
Act with respect to the environment outside of the United States, its
territories and possessions.  The unified nuclear procedures are the
implementing procedures for environmental reviews of nuclear exports
covered by the Executive Order. 


   BACKGROUND
------------------------------------------------------------ Letter :2

The Temelin nuclear power plant is located approximately 60 miles
south of Prague, the Czech capital, and less than 40 miles from the
Austrian border.  A construction permit for four nuclear power
reactors was issued in 1986 under the Communist regime, and work on
the site started in 1987.  In December 1989, after the
Czechoslovakian "Velvet Revolution", a new government was appointed
that was no longer dominated by the Communist Party.  Free
parliamentary elections took place in 1990, and new elections were
held 2 years later.  On January 1, 1993, the state of Czechoslovakia
was divided, creating the Czech and Slovak republics. 

In March 1993, after a 2-month discussion on the fate of the Temelin
project, the Czech government passed Resolution No.  109, which
allowed the Czech electric utility, Ceske Energeticke Zavody Koncern
(CEZ), to complete two of the four planned Temelin reactors and to
substantially upgrade and improve the design and operational safety
of the reactors.  Acting on recommendations from the International
Atomic Energy Agency (IAEA), a U.S.  consulting firm, and others,
Czech utility officials chose to implement technological improvements
to make the plants licensable in a manner comparable to Western
standards.  Contract proposals were accepted for both the Temelin
nuclear fuel supply and the instrumentation and control system.  Bids
were received from 11 foreign suppliers, including the German firm
Siemens, the French consortium Framatome, and Asea Brown-Boveri of
Germany.  Following extensive negotiations, Westinghouse Electric
Corporation signed a contract with the Czech utility in May 1993 to
supply both items. 

Controversy over the project heightened when members of the Austrian
government objected to the United States' involvement in completing a
nuclear power plant so close to the Austrian border.  Austria's
Director of Nuclear Coordination and Nonproliferation told us that
Austrians have a basic consensus against nuclear power and that the
Chernobyl reactor accident had further strengthened this view.  In
February 1994, 1 month before the Bank gave final approval for the
loan guarantee, a delegation representing the Austrian Chancellery
came to the United States and met with about 60 groups over a 3-week
period.  State Department officials characterized the visit as an
attempt by the Austrians to persuade U.S.  officials not to guarantee
the loan.  A member of the Austrian delegation told us that the
United States should give the Temelin reactors the same
scrutiny--such as administering an environmental impact statement
with public comment or providing a preliminary safety review--that it
would if the reactors were located in Cuba or Mexico.  The
delegation's visit coincided with congressional hearings at which the
issues of the Temelin project's nuclear safety and liability were
discussed. 


   U.S.  GOVERNMENT SUPPORTS BANK
   LOAN GUARANTEE FOR SAFETY AND
   COMMERCIAL REASONS
------------------------------------------------------------ Letter :3

By supporting Westinghouse, U.S.  officials promoted U.S.  exports
and facilitated an opportunity for the American firm to participate
in future contracts to upgrade Soviet-designed reactors.  U.S. 
officials believe that upgrading the Temelin reactors with Western
technology will make the reactors safer and will comply with the
shared goals of the Group of 7 (G-7)\3 countries to increase the
safety of Soviet-designed reactors.  Furthermore, in completing the
Temelin reactors, Westinghouse is providing equipment and nuclear
fuel designed to address the most important of the technical concerns
identified by IAEA and an independent nuclear consulting firm. 
However, some Czech and Russian officials disagree about whether or
not Westinghouse has all the Russian design information needed to
develop these components. 


--------------------
\3 The seven major industrialized countries that make up the G-7 are
Canada, France, Germany, Italy, Japan, the United Kingdom, and the
United States. 


      U.S.  OFFICIALS GAVE EARLY
      AND STRONG SUPPORT TO WIN
      TEMELIN CONTRACT FOR U.S. 
      FIRM
---------------------------------------------------------- Letter :3.1

U.S.  officials strongly supported Westinghouse's participation in
the Temelin project and worked with Westinghouse and the Czech
government to help bring about the acceptance of a U.S.  firm for the
project.  In supporting Westinghouse, U.S.  officials saw the
opportunity to gain more than $330 million in U.S.  export earnings
and to strengthen U.S.  influence in important safety matters related
to Soviet-designed reactors.  The Czech Minister of Industry and
Trade and the Chairman of the Board of the Czech utility told us that
the successful completion of the Temelin reactors could lead to
future contracts for Westinghouse to upgrade other Soviet-designed
reactors throughout Eastern Europe.  Because other interested
bidders, such as Germany's Siemens Corporation and France's Framatome
consortium, were strongly supported by their governments, U.S. 
officials believe that without U.S.  government support, Westinghouse
would not have acquired the contract. 

In June 1991, Westinghouse submitted an application to the
Export-Import Bank for a preliminary commitment on a loan guarantee
for its proposed sale of an instrumentation and control system to be
exported to the Czech Republic.  Westinghouse officials believed that
the government's financial backing was necessary to attain the
contract to supply this equipment for use in the Temelin nuclear
power plant.  The Export-Import Bank approved this preliminary
commitment in September 1991.  Earlier, in November 1990,
Westinghouse had applied to the Nuclear Regulatory Commission (NRC)
for an export license for the instrumentation and control system. 
According to Bank officials, requesting an export license and
arranging for financial support at this early stage are typical steps
in the international bidding process. 

As early as October 1991, the U.S.  Ambassador to the Czech Republic
assured Czech officials that if awarded the bid, Westinghouse would
have access to competitive financing for the project through the U.S. 
Export-Import Bank.  In February 1992, letters from the Departments
of State and Commerce to Czech officials further encouraged the
selection of Westinghouse to promote increased cooperation between
Czech and U.S.  firms in nuclear energy and other industries.  In
March 1992, Westinghouse followed up its earlier application to the
Bank with a request for a preliminary commitment on a loan guarantee
for the initial supply of nuclear fuel to Temelin.  This preliminary
commitment was approved in July 1992.  The Bank amended the
preliminary commitments on both requests in October 1992. 


      TEMELIN PROJECT ATTEMPTS TO
      INTEGRATE WESTERN TECHNOLOGY
      INTO SOVIET-DESIGNED VVER
      1000 REACTORS
---------------------------------------------------------- Letter :3.2

In 1990, IAEA reviewed the Temelin plant's design and between 1990
and 1993 sponsored a series of meetings of nuclear safety experts
from Western countries as well as Russia and Ukraine to review the
design, operational safety, and licensing aspects of VVER 1000
reactors.  IAEA review teams recommended modernizing VVER 1000 plants
by using more advanced Western technology to improve performance and
safety.  A 1991 audit by a U.S.  consulting firm assessed the
potential licensability of the Temelin reactors in accordance with
Western standards and concluded that although Temelin could be
licensable to Western standards, its licensability could not be
ensured unless the audit team's technical and programmatic
recommendations were implemented.  (For additional information on the
studies' recommendations, see app.  I.)

In late 1994, IAEA convened a meeting of consultants in Vienna,
Austria, to exchange information on the design modifications and
safety improvements being implemented at the Temelin plant.  CEZ
officials and independent experts discussed how some of the concerns
raised by the U.S.  consulting firm have been addressed.  (For
information on the results of the meeting, see app.  II.)

In July 1992, at the Munich Summit, the G-7 countries endorsed a
nuclear safety assistance program to address the problems of
Soviet-designed reactors.  U.S.  experts concluded that the least
safe Soviet-designed reactors--the RBMKs and VVERs 440/230--should be
shut down as soon as is practicable but that the West should explore
the feasibility of upgrading the VVER 440/213 and VVER 1000 models to
acceptable safety standards.  The VVER 1000 reactor has greatly
improved safety features, including full physical containment,
emergency core cooling systems similar to those in Western plants,
and significant safety system redundancy.  By completing the newer
models with safer Western technology, U.S.  officials believe that it
is more likely that the older, less safe Soviet-designed models will
be taken out of service. 


      DISAGREEMENTS CONTINUE ON
      THE AVAILABILITY OF RUSSIAN
      INFORMATION NEEDED TO
      COMPLETE TEMELIN REACTORS
---------------------------------------------------------- Letter :3.3

Because the Temelin reactors were designed by engineers in the former
Soviet Union, some experts have questioned whether Westinghouse has
been able to obtain all the information it needs to adequately design
the instrumentation and control systems and nuclear fuel for the two
reactors.  Both Westinghouse and CEZ officials told us that they had
obtained all needed information from the Russians.  A Westinghouse
official told us that the company had received enough information
from Russia, Bulgaria, and Ukraine to adequately predict the behavior
of the reactors and that Westinghouse had purchased data from
operating Soviet-designed plants.  Furthermore, Westinghouse
officials developed safety analyses for the Temelin plant
incorporating plant data that they believe are sufficient to indicate
that safety acceptance criteria were met.  (For information on
Westinghouse's safety analyses of VVER 1000 reactors, see app.  III.)

Concerning CEZ's contract with the Russians, the utility's officials
told us that they paid for the design information but were not
permitted to provide the information to a third party.  Now they have
approval from the Russians to turn the data over to Westinghouse, and
CEZ officials are negotiating with Russian officials to obtain
information on the VVER 1000 reactors.  Westinghouse and the Russian
Ministry of Atomic Power signed an agreement for information exchange
whereby Westinghouse paid the Russians directly for information. 
According to CEZ officials, by the end of 1992, all requests for
information from the Russians had been filled.  These same officials
told us later that they met with the Russians in 1994 to request
additional documents but were not successful in obtaining all of
them. 

CEZ officials told us that the Czechs have had substantial experience
with Soviet-designed reactors.  Czech workers at the Temelin site
include personnel from the Czech Republic's Dukovany nuclear power
plant, which consists of four Soviet-designed VVER 440/213 reactors. 
The Czech company, Energoprojekt, provided secondary design work for
three other Soviet-designed nuclear power plants located in the Czech
Republic and Slovakia, as well as for the Temelin plant.  In
addition, the officials noted that six or seven Russian workers have
remained on-site. 

According to the Director of Administration for the Czech nuclear
regulatory authority, Russian officials were unhappy with the Czechs'
decision to purchase nuclear fuel from Westinghouse.  He told us that
although Czech officials believe that the choice was a good one, they
regret the loss of cooperation with the Russians.  He also explained
that the decision to integrate a Western instrumentation and control
system was based largely on an earlier experience when the Czechs
tried to acquire an advanced system from the Russians for two other
Soviet-designed reactors.  The Russians were unable to supply the
system, and the Czechs had to obtain it from the Germans. 

An official with a Russian firm that designs selected reactor parts
and has provided consulting services to the Czechs for the Temelin
project told us that the Russians were concerned that they were no
longer participating in the project, even though they were the
original designers of the Temelin reactors.  Russian officials fear
that if an accident occurred at the plant, they would be blamed as
the original designers.  Furthermore, since Russian involvement has
been eliminated, they cannot ensure that the original design
integrity has been maintained.  He also told us that the Russian
consultants onsite were not involved in day-to-day decisions and do
not have the freedom or responsibility to get help from other Russian
specialists on questions for which the consultants may not have
expertise. 


   THE EXPORT-IMPORT BANK'S REVIEW
   PROCESS FOR THE TEMELIN LOAN
   GUARANTEE
------------------------------------------------------------ Letter :4

Because the proposed exports for the Temelin nuclear power plant did
not constitute the entire nuclear reactor or nuclear steam supply
system, the unified procedures established for the interagency review
of projects were not triggered.  Historically, U.S.  suppliers had
exported complete nuclear power reactors or nuclear steam supply
systems for new plants, but the Temelin project was unique in that
the scope of the proposed Westinghouse contract covered only the
reactors' instrumentation and control system as well as the initial
nuclear fuel for the plant.  As a result, the Bank used its standard
internal procedure to review the environmental and safety effects of
the project.  (For information on the Bank's standard review process,
see app.  IV.)

During the review of the Temelin application, the Bank had one
engineer who was a licensed nuclear engineer.  He was assigned the
responsibility for the evaluation of the environmental and safety
effects of the application for the Temelin project.  Evaluations of
proposed Export-Import Bank financing are based on the following five
criteria:  (1) Is the project technically and commercially feasible? 
(2) Are the known project participants qualified in their respective
fields?  (3) Is the capital cost estimate for the project reasonable? 
(4) Is the schedule for completion of the project realistic?  (5) Are
the environmental effects of the project acceptable?  In addition,
for the review of nuclear power transactions, the engineer evaluates
safety issues associated with the nuclear project, including the
competence and structure of the nuclear regulatory body of the
involved country.  The engineer requests NRC's assistance in the
evaluation of the nuclear regulatory body. 

In nuclear applications for which the proposed scope of supply by a
U.S.  firm includes the complete nuclear steam supply system, the
State Department will typically arrange for the preparation of an
environmental document, which includes a review of the significant
environmental effects of the proposed project.  However, in the
Temelin case, because the proposed export did not encompass the
complete nuclear steam supply system, State Department officials
determined that the unified procedures applicable to nuclear exports
did not apply.  Bank officials realized that the evaluation of the
project's environmental and safety issues would have to be undertaken
internally and began collecting information sufficient to conduct the
evaluation to provide the Board of Directors with the information
necessary to make a decision on whether or not to provide financial
support for the project.  To provide such support, the Board of
Directors had to find reasonable assurance of repayment and had to be
confident that the project was environmentally sound.  (For
information on how Czech officials are addressing some environmental
concerns, see app.  V.)

From March 1993 to June 1994, the Bank's nuclear engineer spent the
majority of his working hours reviewing the Temelin project,
according to the Bank's records.  His work represented the largest
portion of the Bank's efforts to determine that the project was
technically feasible and to assess technical, including safety and
environmental, risks.  According to other Bank officials we spoke
with, the large amount of research and review time spent on the
Temelin evaluation was unprecedented compared to other projects
financed by the Bank.  For example, Bank officials said that during
fiscal year 1994, the Bank received 650 applications that had to be
addressed by its five engineers.  Because of the high ratio of
applications to staff, the amount of time devoted to each application
is limited. 

In reviewing the Temelin project, the Bank's nuclear engineer met
with officials from the Department of Energy (DOE) and NRC to
determine the safety of the VVER 1000 reactors and the adequacy of
the Czech regulators as an independent regulatory agency,
respectively.  He consulted IAEA's Assistant Director General for
Nuclear Safety to learn more about Soviet-designed reactors, reviewed
the study of the Temelin reactors made by the Czech utility's
consultant, and discussed the findings with the consultant's audit
team.  The engineer relied heavily on this study as well as on DOE's
study of VVER reactors for his analysis of the reactors' safety and
then met with Czech officials to discuss what was being done to
correct the problems identified. 

In July 1993, before the final commitment application was received,
the Bank's nuclear engineer visited the Czech Republic for a week,
including 1-1/2 days at the Temelin site.  He was not accompanied by
any other nuclear experts or Bank officials.  According to the
engineer, he walked though the plant and talked to the workers about
what they were doing to ensure the safety of the plant.  He was
impressed by the plant's "housekeeping" and told us that if a plant
is neat and well kept, it looks as though people know what they are
doing and indicates quality workmanship.  He also visited the Czech
manufacturing plant to assess the quality of the Temelin reactor
vessel.  He also met with Czech regulators to assess their regulatory
abilities and to confirm NRC's assessment of the agency. 

On March 10, 1994, the Export-Import Bank's Board of Directors
authorized final commitments for the Bank's guarantees of private
loans to be made to the Czech utility and provided by a group led by
Citibank International.  Repayment of the loans supporting the sale
of the Westinghouse equipment and nuclear fuel was to be guaranteed
by the government of the Czech Republic. 


      THE NATIONAL SECURITY
      COUNCIL CONDUCTED AN
      INTERAGENCY TECHNICAL REVIEW
      OF THE TEMELIN REACTORS
---------------------------------------------------------- Letter :4.1

To determine whether the Temelin nuclear power project met with the
administration's policies, particularly U.S.  environmental policy,
and to garner governmentwide expertise, the Bank's Chairman requested
that the National Security Council conduct an interagency review of
the reactors' design and the capabilities of the Czech regulatory
authorities.  According to Bank officials, they knew that other
agencies in the U.S.  government possessed more information about the
VVER 1000 reactors and in May 1993, asked the National Security
Council to coordinate the agencies' responses.  The Bank asked for
the best information and for the opinion of the National Security
Council on how the Temelin project conforms with the G-7's policy. 
Bank officials did not ask for a complete technical analysis, but
they wanted to determine whether any other agency had problems with
the project. 

On September 29, 1993, the National Security Council submitted to the
Bank a memorandum that contained guidance supporting U.S. 
involvement in the Temelin upgrade.  The memorandum stated that DOE
and IAEA had concluded that the VVER 1000 design can be improved to
meet a level of safety acceptable to Western countries.  It also
said, according to NRC, that the Czech Republic's nuclear regulatory
body meets the criteria for regulatory competence that are currently
under consideration at IAEA.  The National Security Council included
an interagency technical paper presenting the administration's
current body of knowledge about the design of the VVER 1000 reactor
being used at the Temelin site and the technical capabilities of the
Czech regulatory authorities. 

In discussions with DOE officials, we were told that DOE's judgment
on the Temelin project was based on years of experience dealing with
Soviet-designed nuclear power plants.  According to DOE officials,
they are very familiar with the plants' generic design strengths and
weaknesses and relied on IAEA's reports on Temelin in forming their
views.  DOE's then-Director of the International Program Division
said that he had visited a number of Soviet-designed reactors but
that neither he nor his staff visited Temelin during the review
process. 

To ensure that the Czech nuclear regulatory authority could perform
the required studies to license the Westinghouse hardware, NRC
contracted with the Idaho National Engineering Laboratory to provide
2-1/2 years of training to the Czech regulators.  NRC officials
estimate that the training will cost approximately $1.5 million to
$1.6 million.  Funding for the training is being provided by the U.S. 
Agency for International Development under its regional energy
efficiency project.  (For additional information on NRC's training
for Czech regulators, see app.  VI.)


      ABSENCE OF PROCEDURES SPURS
      DEBATE OVER REVIEW PROCESS
      FOR FUTURE NUCLEAR EXPORTS
---------------------------------------------------------- Letter :4.2

As a result of the controversy over the Temelin project, Bank
officials told us that they paid a high price for guaranteeing the
loan.  Specifically, the Bank's General Counsel told us that
responding to the many requests for information was quite costly in
terms of the staff time needed to gather and reproduce documents.  It
was also the first time that an adjoining country, Austria, had
objected to the Bank's involvement in a project and also quite
unusual for the Bank's Chairman to request that the National Security
Council get involved in a project.  Bank officials told us that they
wanted to ensure to the greatest extent possible that the Temelin
loan guarantee review would stand up to public scrutiny.  The
National Security Council's review provided additional assurance of
credibility and accountability. 

During the review process, Bank officials had occasional difficulties
in acquiring the information needed for a review of Temelin. 
Internal memorandums among Bank officials involved in the Temelin
review expressed concern about the difficulties in obtaining
information pertinent to the review.  One official noted that

     [I]t is absolutely unacceptable to have a situation where we
     don't get a document or are not otherwise informed of something
     because we didn't ask exactly the "right" question in the
     "right" way.  We are to be treated as full partners in this
     operation with direct access to everything we need to know in
     order that the Board can reach a final decision based on all the
     facts.  As far as I'm concerned, this message should be
     communicated directly to CEZ, the Czech Embassy, State Dept. 
     and U.S.  Embassy Prague, NSC [National Security Council], NRC,
     and all of the various law firms and PR [public relations] firms
     now engaged in this undertaking.  They must be fully apprised of
     the gravity of this request. 

Memorandums also revealed that the Bank's General Counsel believed
that the unified nuclear procedures directing environmental
assessments of nuclear exports should be amended so that they apply
to the export of major parts of nuclear power plants, such as
instrumentation and control systems.  If projects like Temelin were
placed under the unified nuclear procedures, the issue would be
addressed by the federal agencies with expertise in nuclear matters. 
Officials from DOE, NRC, and the State Department disagreed with this
proposal, which they saw as "poorly conceived and unnecessary" and
which would not "affect the basic decision on whether the foreign
project would go forward."

Another Bank official continued, noting that

     I am not persuaded by State's counterarguments.  The fact that
     there will be many more nuclear power upgrades in the future
     supports the need for environmental review.  To the extent that
     the work done on Temelin is applicable to future upgrades, then
     it can be turned into a "generic assessment" which will reduce
     the workload in future upgrade transactions.  It's not that we
     want a higher comfort level than we have received on Temelin. 
     Although we are not dissatisfied with the amount of support we
     ultimately received from other agencies to assist us in
     reviewing Temelin, we think that there should be an established
     process for conducting such reviews.  In Temelin, there was no
     procedure and we had to exert a lot of effort to push the other
     agencies to deal with the issue. 

A May 1994 State Department cable quotes an NRC official as saying
that extensive U.S.  government efforts were needed to persuade the
Export-Import Bank Board to hold fast to its earlier commitment to
provide the necessary loan guarantees in the face of concerted
efforts by antinuclear groups, requests for information pertaining to
the Temelin project filed by opposition groups under the Freedom of
Information Act, and the decision of NRC's Chairman to recuse himself
from voting on the export license because of his well-known
pro-Temelin views.  Earlier, in a draft letter to the Vice President
of the United States dated November 17, 1993, to be signed by
officials from DOE, NRC, and the State Department, it was noted that
"efforts to upgrade Soviet-designed nuclear reactors could be
undermined by .  .  .  the protracted and increasingly sterile review
of Export-Import Bank financing guarantees .  .  .  for the Temelin
nuclear power plant." In addition, the draft letter refers to
"informal indications that the Export-Import Bank may not be
satisfied with the approach taken by the Executive Branch in Temelin,
and may seek a different approach for future nuclear-related cases."


      BANK OFFICIALS DRAFT NEW
      ENVIRONMENTAL AND SAFETY
      PROCEDURES FOR NUCLEAR
      EXPORTS
---------------------------------------------------------- Letter :4.3

In March 1995, Bank officials told us that the Bank is in the process
of drafting procedures to address nuclear safety and environmental
concerns for nuclear exports that do not fall under the State
Department's unified nuclear procedures.  The draft procedures are
currently undergoing internal review, and Bank officials expect the
new procedures to be completed by early fall 1995. 

Bank officials expect that these procedures will facilitate the
review process by alerting applicants of information requirements and
establishing a list of elements that will be evaluated against
proposed guidelines.  The Bank's procedures will apply to all
categories of eligible nuclear exports.  In cases where the unified
procedures apply, the Bank's procedures will incorporate the
environmental review conducted under the unified procedures.  Thus,
the Bank's procedures will not substitute for the unified procedures. 

The Bank's General Counsel told us that she no longer views the
unified procedures as the best way of addressing environmental
concerns for the components of nuclear power plants.  According to
Bank officials, the Bank's procedures are more flexible and allow the
Bank's engineers to focus on those environmental and safety issues
most relevant to specific exports.  Although these procedures are
internal to the Bank, Bank officials feel confident that other
agencies will be responsive to their requests for information and
believe that the Bank is now seen as an important player in
facilitating nuclear reactor upgrades abroad.  According to Bank
officials, pending bids by U.S.  suppliers to upgrade reactors in
China, Hungary, and the former Soviet Union may require Bank
financing. 


   EXPORT-IMPORT BANK SATISFIED
   THAT RISK OF LEGAL LIABILITY
   FOR ANY DAMAGE CAUSED BY
   TEMELIN PLANT IS REMOTE
------------------------------------------------------------ Letter :5

According to the Bank's General Counsel, Bank officials have
carefully examined the question of whether the Bank could be held
liable for damages in the event of a nuclear incident at the Temelin
facility.  (See app.  VII for a photograph of the Temelin power
plant.) On the basis of an analysis of the Vienna Convention on Civil
Liability for Nuclear Damage, proposed Czech law, the domestic law of
the United States and other countries, and international law, the
Bank's Office of the General Counsel concluded that the chances are
very small that the Bank would be held liable in any court for such
damages. 


      CZECH AND INTERNATIONAL LAW
      SUPPORT OPERATOR'S LIABILITY
      IN CASE OF NUCLEAR ACCIDENT
---------------------------------------------------------- Letter :5.1

The Vienna Convention is an international treaty that channels
exclusive liability for nuclear damage to the operator of the nuclear
facility that caused the damage.  Before the Bank's Board of
Directors considered the Temelin case for referral to the Congress on
January 27, 1994, the Czech government had adopted a resolution
supporting adherence by the Czech Republic to the Vienna Convention
and had submitted the appropriate legislation to the Czech
Parliament.  As recommended by the Bank's staff, the Board of
Directors adopted a special condition that the Bank's legally binding
guarantee would not be furnished until after the Czech Parliament
consented to the Czech Republic's adherence to the Vienna Convention. 
This condition was subsequently satisfied when the Czech Parliament
voted unanimously on February 15, 1994, to ratify the Vienna
Convention. 

On March 24, 1994, the instruments of ratification were duly
deposited with IAEA in Vienna, and after a 3-month period set forth
in article XXIV(3) of the Vienna Convention, the Czech Republic
became a party to the Convention.  Accordingly, the Czech Republic
has committed itself to impose liability for any nuclear incident at
the Temelin facility exclusively on the operator of the facility. 

As a signatory to the Vienna Convention, the Czech Republic is
obligated to adopt appropriate implementing legislation.  In a letter
dated March 3, 1994, Prime Minister Vaclav Klaus assured the Bank's
Chairman that the Czech government will use its best efforts to
ensure prompt passage of such implementing legislation.  This
legislation is now being prepared.  The principles of the law were
considered by the appropriate ministries of the Czech government in
early 1995.  Recently, the principles have been submitted for
approval to the Czech Cabinet.  Once approved the principles will
serve as a basis for the final language of the law, which should be
passed by the Parliament by the end of 1995.  The Czech government
expects that the law will be in force before the scheduled completion
of the Temelin facility.  Even in the absence of implementing
legislation, any attempt by the Czech Republic to impose liability on
a party other than the nuclear facility's operator would be
inconsistent with the country's treaty obligations. 

Subsequent to the Bank's approval of the Temelin guarantee, CEZ and
the Czech government agreed in principle to indemnify the Bank and
the commercial lenders for an amount governed by the Vienna
Convention for any losses relating to or arising out of design,
manufacture, use, or operation of the Westinghouse products or of the
Temelin facility as a whole.  The Czech utility and the Czech
government have also agreed that in the event that the Czech Republic
withdraws from the Vienna Convention or repeals the domestic law
implementing the Vienna Convention, the Export-Import Bank and the
commercial banks will have the right to accelerate the loan and
require immediate repayment of all outstanding amounts. 

As a practical matter, Westinghouse has assured the Bank that if the
Czech Republic does not adopt national legislation implementing the
principles of the Vienna Convention, it has no intention of making
nuclear fuel shipments under the supply contracts that would allow
the Temelin plant to be operated.  Westinghouse has reserved the
contractual right to withhold such shipments in order to protect its
own interests. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Export-Import Bank officials believe that the loan review process
must be facilitated if future nuclear exports like the Temelin
project are to be financed, especially since the Bank may be asked to
finance reactor upgrades in China, Hungary, and countries of the
former Soviet Union in the near future.  In reviewing the Temelin
project, Bank officials were responsible for addressing environmental
issues because the established procedures requiring State Department
review did not apply to the exports proposed by Westinghouse. 
Although Bank officials received guidance from the National Security
Council and other U.S.  agencies, they had occasional difficulty in
obtaining some information pertinent to the Temelin project.  At the
same time, Bank officials had to respond to the concerns of
environmental groups, the Austrian government, and some Members of
Congress that the Bank's review was not sufficient to determine the
environmental and safety impacts of the Temelin project.  Our
analysis found that the actions taken by Bank officials in reviewing
the Temelin project appear reasonable, and we believe that new
procedures addressing exports of nuclear reactor parts may facilitate
future transactions. 

The Export-Import Bank's Office of the General Counsel has assured
its Board of Directors that the risk of legal liability for any
damage caused by the Temelin plant is remote.  On the basis of an
analysis of the Vienna Convention, proposed Czech law, the domestic
law of the United States and other countries, and international law,
the Bank concluded that the chances are very small that it would be
held liable in any court for such damages.  On the basis of the
Bank's analysis and supporting documentation, we believe that the
Bank's decision is reasonable. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

We provided a draft of this report to the Export-Import Bank for its
review and comments.  On May 31, 1995, we met with Export-Import Bank
officials, including the Bank's General Counsel, to discuss the
Bank's comments.  In general, Bank officials agreed with the facts
and analysis presented.  They gave us additional clarifying
information, and we revised the text as appropriate.  Representatives
of the State Department, including the Deputy Office Director, Office
of the Senior Coordinator for Nuclear Safety; NRC, including the
Senior Program Manager, Office of International Programs; and DOE,
including the Director of the Office of Nuclear Energy, also reviewed
a copy of the draft report and gave us clarifying information, and we
revised the text as appropriate.  In addition, representatives of the
Czech Republic's Embassy in Washington, D.C., also reviewed a copy of
the draft report and suggested some technical revisions regarding the
status of their proposed nuclear legislation.  We made changes to the
text where appropriate. 


   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To determine why the U.S.  government supported the Bank's loan
guarantee for the completion of the Temelin reactors, we interviewed
officials and reviewed documents from DOE, NRC, the National Security
Council, and the State Department.  To determine what actions the
Bank took to ensure the soundness of the project, we interviewed
officials from the Bank, Westinghouse, and the engineering consulting
firm that audited the Temelin reactors and reviewed the Bank's
documents relating to the Temelin project.  We also reviewed
appropriate provisions of the Vienna Convention on Civil Liability
for Nuclear Damage, domestic law of the United States, international
law, and the Bank's Office of the General Counsel's analysis of
potential liability to the United States. 

In addition, we visited the Temelin nuclear power plant site in the
Czech Republic and interviewed Czech officials, including the
Chairman of the Board of the Czech utility, CEZ; the former Prime
Minister of the Czech Republic; the Minister of Industry and Trade;
the Deputy Minister of the Environment; the Director of
Administration of the Czech regulatory body; and two resident
regulatory inspectors at the Temelin plant.  In Vienna, Austria, we
interviewed several officials from the Federal Chancellery of
Austria, the Director of the Austrian Energy Utilization Institute,
an official from the Austrian Research Center, a nuclear physicist
from the University of Vienna, and several officials from the
International Atomic Energy Agency's Division of Nuclear Safety. 

We performed our review between June 1994 and May 1995 in accordance
with generally accepted government accounting standards. 


---------------------------------------------------------- Letter :8.1

We plan no further distribution of this report until 15 days from the
date of this letter unless you publicly announce it contents earlier. 
At that time, we will send copies to the Chairman, U.S. 
Export-Import Bank; the Secretaries of State and Energy; the
Chairman, Nuclear Regulatory Commission; the Director, Office of
Management and Budget; and other interested congressional committees. 
We will also make copies available to others on request. 

Please call me at (202) 512-3841 if you or your staff have any
questions.  Major contributors to this report are listed in appendix
VIII. 

Sincerely yours,

Victor S.  Rezendes
Director, Energy and
 Science Issues


STUDIES OF THE VVER 1000 REACTOR
RECOMMEND TECHNICAL CHANGES
=========================================================== Appendix I

In 1990, the International Atomic Energy Agency (IAEA) reviewed the
Temelin plant design and in 1992 sponsored a meeting of nuclear
safety experts from Western countries as well as Russia and Ukraine
to review the design, operational safety, and licensing aspects of
VVER 1000 reactors.  Recommendations made by the IAEA review teams
centered on modernizing VVER 1000 plants by using more advanced
Western technology to improve performance and safety.  The most
important of the recommendations, not all of which apply to the
Temelin reactors, were the following: 

  Enhancements to the fuel and control rod designs should be made to
     improve performance. 

  An improved core control strategy should be used to improve the
     plant's operability. 

  The instrumentation and control systems are based on "old"
     technology, and the feasibility of replacing or upgrading the
     systems hardware to improve the reactors' reliability and the
     plant's performance should be evaluated. 

  Specific changes in the reactors' control and protection system
     designs should be implemented to enhance the plant's safety. 

  A systematic and comprehensive safety analysis using
     state-of-the-art technology should be done consistent with
     typical Western licensing practices. 

  The control room design should be modernized to improve the quality
     and quantity of information available to the plant's operators. 

In 1991, Ceske Energeticke Zavody Koncern (CEZ) officials requested
an audit by a U.S.  consulting firm to assess the potential
licensability of the Temelin reactors in accordance with Western
standards and regulations expected to be in effect in the mid-1990s,
the anticipated commissioning date of the reactors.  While the
principal focus was on nuclear safety and licensability, the audit
also included other technical, economic, and management aspects of
the Temelin project.  On the basis of the scope and results of its
reviews, the audit team concluded that Temelin can be licensable to
Western standards in the mid-1990s but that its licensability cannot
be ensured unless the audit team's technical and programmatic
recommendations are implemented.  Although the Temelin reactors are
not being licensed to Western standards, CEZ officials have made or
are making several changes that address some of these concerns. 

The consulting firm's audit team found that a number of the initial
Temelin design concepts, criteria, or analyses fell short of modern
Western practices but that these shortcomings could be largely
eliminated through design improvements that are expected to make the
plant comparable with contemporary facilities in the West.  These
include the addition of a modern instrumentation and control system,
an improved fuel and core design, improvements resulting from VVERs'
and Western nuclear power plants' operating experience, and
improvements resulting from the audit team's recommendations.  The
audit team also found that the Czech plant managers needed to more
fully develop the "safety culture" in which one approaches plant
safety with a questioning attitude that avoids complacency.  In
addition, the audit team found an inadequate amount of information
from the original Soviet reactor supplier about the technical basis
and underlying analyses of the plant's design. 

The audit team concluded that the Temelin plant's design includes a
number of important features that equal or, in some cases, exceed
Western practices.  These areas of strength include, for example,
good physical separation between trains of safety-related components
and a large degree of safety-related system redundancy, including
three independent spray ponds that are each capable of accepting the
plant's maximum heat loads. 

In October 1992, the audit team prepared a progress report on its
audit findings and subsequent follow-up tasks, including an action
plan listing tasks and the priority in which they should be
accomplished.  The audit team found that implementation progress on
these tasks had been and continued to be slow and concluded that
implementation must be accelerated if the plant's current schedule is
to be maintained. 

In a March 1994 position paper, Czech officials noted that they had
worked closely with the audit team to draft a corrective action plan
based on the findings and recommendations of the initial audit.  The
officials said that the plant's general designer and the original
Russian designer have participated in the action plan implementation,
that many tasks in the plan have been accomplished, and that the
remaining ones are proceeding on schedule.  They concluded that
implementation of the action plan invalidates negative findings about
the Temelin project made by previous reviews, such as IAEA's 1990
review and the consulting firm's audits, and that all references to
these findings are no longer valid. 


DESIGN-RELATED RECOMMENDATIONS BY
PRIVATE NUCLEAR CONSULTANT AUDIT
TEAM AND STATUS OF IMPROVEMENTS
========================================================== Appendix II

First Priority Actions                   IAEA Meeting Discussion\a
---------------------------------------  ---------------------------------------
Complete the evaluation of the new       In response to an IAEA technical and
fuel/core bids and ensure the continued  design review mission of the Temelin
availability of necessary design         nuclear power plant, CEZ officials
information from the original Soviet     adopted a modified core and fuel design
designers. This effort should be         for the reactors to improve safety,
integrated into the overall assessment   fuel cycle cost, and overall economy
of Temelin.                              and to increase operational
                                         flexibility.

                                         The audit team found that substantial
                                         technical information from the original
                                         Soviet designers would be needed to
                                         design the new fuel and core. It
                                         recommended that negotiations for
                                         obtaining such information from the
                                         Soviet designers be accelerated.
                                         According to CEZ and Westinghouse
                                         officials, the need for Soviet
                                         assistance has not been extensive, but
                                         they have been able to get what they
                                         need.

Complete the evaluation of the           Because Russian instrumentation and
replacement instrumentation and control  control equipment has a record of
equipment bids and ensure the continued  unreliability and does not incorporate
availability of necessary design         digital technology such as what is now
information from the original Soviet     being used in Western plants, CEZ
designers. This effort should be         officials chose to replace Temelin's
integrated into the overall assessment   instrumentation and control system to
of Temelin.                              improve the reactors' performance and
                                         safety.

                                         The system being supplied is similar to
                                         those used on other Westinghouse-
                                         designed nuclear power plants. One
                                         exception, however, is that CEZ
                                         officials specified that a Diverse
                                         Protection System be added. Its
                                         addition is intended to give greater
                                         assurance that core damaging accidents
                                         will be avoided.

                                         According to CEZ and Westinghouse
                                         officials, the need for Soviet
                                         assistance has not been extensive, but
                                         they have been able to get what they
                                         need.

Conduct Level 1 and 2 probabilistic      CEZ officials contracted with a U.S.
safety assessments (PSAs) using an       consulting firm to perform Level 1 and
entity independent of the design         2 probabilistic safety assessments of
organizations. This activity should      the Temelin reactors. Work began in
begin as soon as possible to be of       September 1993. It is expected that the
maximum use in the design.               PSA Level 1 for internal events will be
                                         completed by March 1995, and the PSA
                                         Level 2 will be done by September 1995.

Conduct a Western fire hazards           The presentations made at the
analysis. This activity should be        consultants meeting in Vienna did not
completed as soon as possible to enable  include fire hazards analysis.
results to be factored into the design.

Critically examine the equipment         The consulting firm's audit emphasized
qualification program and take the       the need for a program to ensure that
actions necessary to ensure its          safety-related equipment would operate
adequacy.                                in case of an accident. Some equipment
                                         might be required to operate under
                                         severe pressure, temperature, and
                                         humidity conditions. A program to
                                         qualify equipment for the expected
                                         service conditions is common for U.S.
                                         plants and is needed for Temelin. The
                                         presentations made at the consultants
                                         meeting in Vienna did not include
                                         discussions of an equipment
                                         qualification program.

Complete the seismic reanalysis of       The presentations made at the
safety-related structures and systems.   consultants meeting in Vienna did not
                                         include discussions of seismic
                                         analysis.

Conduct a comprehensive design review    The presentations made at the
to determine the adequacy of safety      consultants meeting in Vienna did not
train separation in the detailed plant   include discussions of safety train
and system designs.                      separation.

Conduct and document comprehensive       The presentations made at the
containment subcompartment analyses      consultants meeting in Vienna did not
under post-loss of coolant accident      include discussions of post-loss of
conditions.                              coolant accident containment analyses.

Collect/create Temelin design basis      The presentations made at the
documentation and supporting design      consultants meeting in Vienna did not
information.                             include discussions of design basis
                                         information.

Provide single failure protection for    The Temelin containment sump design has
critical piping leading from the         been redesigned to prevent clogging due
containment sump.                        to debris collection and to prevent the
                                         formation of a vortex that could
Conduct a detailed review of all         interrupt suction from the sump.
aspects of containment sump and          Presentations at the Vienna consultants
connected systems design.                meeting said that these changes and
                                         modifications solved the sump concerns.

Make provisions to facilitate adding a   As reported at the Vienna consultants
filtered vent to containment.            meeting, the Czech Nuclear Research
                                         Institute has analyzed severe
                                         accidents, i.e., accidents that are
                                         more severe than the accident scenarios
                                         that form the basis of the plant's
                                         safety systems design. Czech
                                         regulations do not require that
                                         measures be taken to cope with severe
                                         accidents. However, the Nuclear
                                         Research Institute has investigated
                                         ways to manage severe accident
                                         consequences. One possibility is to
                                         install a filtered vented containment,
                                         but design modifications to add a
                                         filtered vented containment had not
                                         been completed as of December 1994.

Reevaluate the need for a boric acid     The discussion of design modifications
tank heating system.                     to the Temelin nuclear power plant's
                                         emergency core cooling system at the
                                         consultants meeting did not make
                                         mention of any changes to boric acid
                                         tank heating.

Establish a defensible coping time       The consulting firm's audit raised a
criteria for loss of all off-and on-     concern about the adequacy of the
site AC power and demonstrate the        direct current power system needed
design can meet it.                      between loss of outside power to the
                                         Temelin site and the startup of
Conduct a comprehensive review of the    emergency generating equipment on the
adequacy of the DC battery system and    Temelin site. Temelin officials said
make any necessary design changes.       that a source of direct current power
                                         is provided for each safety system, but
                                         the capacity and duration of the power
                                         supply, the basis of the consulting
                                         firm's concern, was not discussed.

Review the safety system designs         The consultants meeting discussions did
relative to the potential effects of     not include the effects on non-safety-
non-safety-related component failures    related component failures on the
on the safety-related systems.           safety-related systems.

Complete the liquid radwaste evaporator  The consultants meeting discussions did
design study and make any necessary      not include liquid radwaste evaporator
design changes.                          design.

Explore the advantage of not
regenerating depleted resin beds in the
liquid radwaste design.
--------------------------------------------------------------------------------
\a The scope of the IAEA meeting was not designed to include
discussion on all of the design-related recommendations made by the
consultant's audit team. 


APPLICATION OF WESTINGHOUSE'S
SAFETY TECHNOLOGY TO
RUSSIAN-DESIGNED VVER 1000 NUCLEAR
POWER PLANTS
========================================================= Appendix III

The Temelin VVER 1000 nuclear power plant is the most advanced
Russian-designed pressurized water reactor.  The VVER 1000 plant's
design is a four-loop pressurized water reactor similar to the
Westinghouse pressurized water reactor for which extensive safety
analyses methods have been developed and accepted by the U.S. 
Nuclear Regulatory Commission and other regulatory bodies throughout
the world.  According to Westinghouse officials, the physical
behavior, characteristic response, and modeling of the VVER 1000
nuclear power plant's design may be readily represented by the
Westinghouse safety analysis technology because of the fundamental
similarity in designs.  The safety analysis methods used for Temelin
required qualification and verification only for the unique design
features of the VVER 1000 design, and this qualification was
accomplished by comparisons to data from VVER 1000 plants,
comparisons to separate effects tests representing the unique VVER
plants' design features, and comparisons to integral facility tests
that incorporated unique features of the VVER 1000 design. 
Temelin-specific geometric and physical data for the plant's design
obtained in cooperation with the plant owner, CEZ; the plant's
general designer, Energoprojekt; and the plant's general contractor,
SKODA, as well as original Russian design documentation and the Czech
Technical University, were used to calculate conservative safety
analyses results using the qualified and verified methods.  The
safety analyses results indicated that the safety acceptance criteria
had been met. 

According to Westinghouse officials, the safety analysis approach
applied to the Temelin nuclear power plant is the same approach that
is utilized and accepted by regulatory authorities to support nuclear
power plant licensing throughout the world.  In this approach,
unacceptable consequences resulting from faults are defined,
depending upon the frequencies of the event.  Unacceptable
consequences include fuel failures and off-site radiation releases. 
Once unacceptable consequences have been defined, limits are
established on the plant's operations; exceeding these limits could
lead to unacceptable consequences.  The required protection system
functions and actions based upon the events and consequences are
established.  Safety analyses are performed for a complete range of
plant conditions and accident scenarios to demonstrate that
acceptable results are obtained for the spectrum of initiating
events. 


EXPORT-IMPORT BANK'S STANDARD
REVIEW PROCESS AT THE TIME OF THE
TEMELIN REVIEW
========================================================== Appendix IV

The Export-Import Bank is an independent agency with a five-member
Board of Directors who are appointed by the President and confirmed
by the Senate.  Under the Bank's charter, most recently reauthorized
by the Congress in 1992, the Bank's decisions on transactions may be
based only on commercial, financial, and environmental grounds, not
on foreign policy considerations. 

All long-term projects--those over $10 million or with a repayment
period of more than 7 years--are assigned to a team consisting of a
loan officer, an engineer, an economist (in certain cases), and an
attorney.  The loan officer performs a financial analysis of the
proposed transaction to determine whether there is a reasonable
assurance of repayment and makes recommendations on the financial
structure of the transaction.  The engineer prepares a technical
evaluation and an environmental evaluation.  (Since the Temelin
transaction, the Bank has hired an environmental specialist to
oversee environmental evaluations.) The economist analyzes the
foreign country's economic conditions to assist in determining
whether there is a reasonable assurance of repayment.  The attorney
is responsible for legal issues and for preparing the legal
documentation for the transaction.  After completing its analysis,
the team presents its report and recommendation to the Board of
Directors for consideration.  At the Board meeting, members of the
Board usually ask questions about the proposed transaction before
making a determination. 

The Bank's Board of Directors considered the Temelin transaction at
two different stages:  preliminary commitment and final commitment. 
A U.S.  exporter or commercial bank may apply to the Bank for a
preliminary commitment when the exporter needs a financing offer in
order to compete for a contract award.  Before recommending a
preliminary commitment, the staff analyzes the financial and
technical feasibility of the transaction, performs an environmental
evaluation, and examines any legal issues that may arise.  If the
request for a preliminary commitment is approved by the Board of
Directors, the Bank sends the applicant a letter specifying the
interest rate and the terms and conditions of the financing offer
(usually an option for either a direct loan or a loan guarantee). 
The exporter then uses the Bank's financing offer to complement its
commercial and technical proposal to the foreign buyer, which is
typically the borrower. 

If the contract is awarded to the U.S.  exporter, the foreign
borrower--or the guaranteed lender--may submit an application seeking
conversion of the preliminary commitment to a final commitment.  The
assigned transaction team, usually consisting of the same individuals
who worked on the transaction at the preliminary commitment stage,
conducts a further review of the financial, technical, environmental,
and legal issues presented by the finalized transaction.  In some
cases, the review at this stage is substantially more extensive than
at the preliminary commitment stage, because more comprehensive
information is available from the foreign buyer.  After completing
its review, the staff then submits a recommendation to the Board of
Directors. 

If a transaction involves exports of technology, fuel, equipment,
materials, or goods or services to be used in nuclear facilities, the
Board of Directors votes initially to approve a final commitment and
submits the transaction to the Congress for review, as required by
statute.  A detailed statement describing and explaining the
transaction must be submitted to the Congress in at least 25 days of
a continuous session of the Congress, or 35 calendar days if either
the House or the Senate is in adjournment for a period which
continues for at least 10 days after the date of the Bank's
submission of the statement.  After this period has terminated, the
transaction may be finally approved by the Board of Directors.  After
the Board's action, the Bank's staff negotiates the terms of a credit
agreement and (in the case of a loan guarantee) a guarantee agreement
with the borrower and other parties to the transaction. 


CZECH OFFICIALS ADDRESS RADIATION
AND LONG-TERM SPENT FUEL STORAGE
CONCERNS
=========================================================== Appendix V


      THE CZECH MINISTRY OF
      ENVIRONMENT CONDUCTS
      RADIATION STUDIES
------------------------------------------------------- Appendix V:0.1

The Czech Ministry of Environment was established on December 19,
1989.  At that time, one-third of the construction on the Temelin
nuclear power plant had already been completed.  As a result, the
Ministry had no influence over site selection.  During the time of
the site selection, a Section of Environment was located in the
Ministry of the Interior.  Officials from this office assessed the
site on the basis of the rules and by-laws for the construction of
buildings that were in effect at that time.  An environmental impact
statement was not performed for the reactor site. 

According to the Deputy Minister of the Environment, the Ministry has
evaluated the impact of the Temelin plant on water resources only.  A
hydrological study was conducted on the migration of radionuclides
released from the Temelin plant into the system of dams on the Vltava
River.  The study concluded that planned releases of the
radionuclides will not affect the water resources in any outstanding
way.  According to Ministry officials, the study also evaluated
probable tritium releases, and even then the results were acceptable. 

Ministry officials told us that in case of an accidental release, it
will take many weeks for the contamination to reach Prague.  Three
dams lie between the plant site and the city, and according to
Ministry of Environment officials, most of the radionuclides would
sink into the sediment.  After the plant is operating, Vltava River
laboratory authorities will constantly monitor and analyze the
radiation levels in the sediment and ground water.  Soil analyses
will be performed at an external dosimetry laboratory.  Quarterly
reports and yearly summaries will be published by CEZ and the Temelin
laboratories.  In case of any problems, the Vltava River Authority
will report directly to the Minister of Environment. 

Before the start-up of the Temelin plant, Czech officials plan to
have a program in place to monitor radiation levels.  Acceptable
levels of radioactive releases are being set by the Ministry of
Health with the cooperation of the Ministry of Environment.  The
Ministry of Health has expertise in this area through its Water
Research Institute, which has worked on radiation detection in the
past and will set up special laboratories to research radiation
levels.  Acceptable standards of release will be developed to meet
international standards. 

Ministry of Environment officials have no authority to limit or stop
the operation of a nuclear power plant or to inspect within the plant
itself.  These responsibilities belong to the Czech nuclear
regulatory authority.  Ministry of Environment officials inspect air
and water outside of the plant; in case of a problem that falls under
the responsibility of the regulatory authority, officials would
contact either the inspector responsible for that particular area of
operations or nuclear regulatory headquarters in Prague. 


      NO FINAL DECISION MADE ON
      LONG-TERM SPENT FUEL STORAGE
------------------------------------------------------- Appendix V:0.2

CEZ officials are searching for a site to build a permanent waste
storage facility but have not made a final decision.  A facility for
permanent storage will be needed by the year 2030, and 10 potential
sites have been pre-selected.  Interim facilities at the Dukovany
nuclear power plant allow spent fuel to be temporarily stored and
cooled on site, and spent fuel from the Temelin reactors could be
temporarily stored inside the Temelin containment itself. 

The Czech Minister of Environment has expressed concern about the
lack of a permanent waste storage facility and wants a legal
guarantee of permanent storage and decommissioning defined by
standards in the law that would deny operating licenses until spent
fuel disposal plans are completed.  Specifically, he would require
that CEZ and the Ministry of Industry and Trade develop a long-term
concept on plans for decommissioning a plant and permanently storing
spent fuel.  In the case of the Temelin plant, the building permit
has already been issued, and current Czech by-laws and regulations do
not require input from the Ministry of Environment in assessing
storage sites.  However, internal Ministry directives require the
Ministry to prepare a report concerning the environmental impacts of
radioactive waste storage at the selected sites.  When a site is
selected, the Ministry of Environment will report on the
environmental impacts of the facility. 


NRC PROVIDES TRAINING FOR CZECH
NUCLEAR REGULATORY AGENCY
========================================================== Appendix VI

Because Westinghouse is providing the instrumentation and control
system and specially designed nuclear fuel for the Temelin reactors,
NRC's contractor is training the Czech regulators to perform
regulatory tasks on these components as well as in all other
interfaces of the reactors.  The contractor is also teaching the
Czech regulators NRC's approach and methodology for licensing nuclear
power plants, but officials stress that they will not comment on the
licensability of the Temelin reactors.  An NRC official will receive
periodic reports from the contractor to confirm that the subject
matter being taught conforms to the agreed-upon methodology.  Most of
the training is taking place at the Idaho National Engineering
Laboratory at Idaho Falls, Idaho; some activities are taking place in
the Czech Republic. 

Training for the Czech regulators includes a Temelin safety analysis
of the Westinghouse components to be performed at the same level of
competence and technical capability as if it were being done in the
United States.  The contractor will provide the training and monitor
the Czechs' execution of the safety review.  NRC officials told us
that they maintain a close technical exchange with the Czech
regulators, and if something unacceptable occurs during the review,
they will contact the regulators and remind them that certain
agreed-upon items have not been followed.  In case of a conflict, NRC
officials may point out that this practice would be unacceptable in
the United States; however, the Czech regulators must make the final
decision.  NRC officials are concerned only with how regulatory
decisions are being made and, because they have no authority to
enforce their own decisions, will not accept responsibility for the
safety of the Temelin reactors. 

According to the contractor, the Czech regulators have a good level
of knowledge about certain NRC requirements--particularly in the
instrumentation and controls area--but need examples of how NRC
evaluated compliance with these requirements.  NRC officials told us
that currently the Czech nuclear regulatory structure does not have
enough staff and needs to be strengthened in some areas, but NRC
officials expect these changes to occur this year.  NRC officials
believe that because the Czech regulators have greater autonomy and
independence than either Russian or Ukrainian regulators, the Czechs
have a stronger regulatory authority.  They also believe that
Westinghouse won the Temelin contract partially because the Czech
regulators had confidence in NRC's licensing approach. 


VIEW OF TEMELIN NUCLEAR POWER
PLANT
========================================================= Appendix VII



   (See figure in printed
   edition.)

   Source:  Westinghouse Electric
   Corporation.

   (See figure in printed
   edition.)


MAJOR CONTRIBUTORS TO THIS REPORT
======================================================== Appendix VIII

RESOURCES, COMMUNITY, AND ECONOMIC
DEVELOPMENT DIVISION, WASHINGTON,
D.C. 

Bernice Steinhardt, Associate Director, Energy and Science Issues
Gene Aloise, Assistant Director
Patricia J.  Metz, Senior Evaluator
Glen Levis, Senior Evaluator
Thomas J.  Flaherty, Senior Evaluator
Duane G.  Fitzgerald, Ph.D., Nuclear Engineer

OFFICE OF THE GENERAL COUNSEL

Jackie A.  Goff, Senior Attorney

EUROPEAN OFFICE

Pamela J.  Timmerman, Senior Evaluator
Lauren V.  A.  Waters, Evaluator

