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April 19, 2011
HSBC Contracts with Bulgaria to Fund Nuclear Power Plant in Seismic Area
    by Robert Kropp

As radiation continues to escape the crippled Japanese plant, BankTrack criticizes HSBC's decision as "incomprehensible," and MSCI issues report questioning the credibility of the nuclear industry.

More than a month since four reactors at the Fukushima Daiichi Nuclear Power Plant were crippled by an earthquake and tsunami, dangerously high levels of radiation continue to escape the plant. Last week, Japanese authorities upgraded the seriousness of the accident to Level 7, equal to that of Chernobyl in 1986.

As reported in the Washington Post last week, a spokesperson for Tokyo Electric Power (TEPCO), the owner of the plant, stated, "Our concern is that the amount of leakage could eventually reach that of Chernobyl or exceed it."

Apparently disregarding the inherent dangers of building nuclear power plants in seismic areas, HSBC, the UK-based bank, has contracted with the government of Bulgaria "to analyze and find investors for the long delayed and highly controversial Belene nuclear power plant project in Bulgaria," according to BankTrack, a nongovernmental organization (NGO) based in the Netherlands.

"The Belene NPP is a structurally flawed project located in an earthquake-prone area," BankTrack stated. "Once constructed it will pose a permanent threat to the safety of Bulgaria and Europe."

Bulgaria is reportedly paying HSBC $2.85 million to appraise the financial viability of the Belene project. However, if HSBC gives the project a green light, the bank will then receive 0.95% of foreign investment capital that it brings to the project. If constructing the plant costs $7.15 billion, HSBC will receive an additional $67.8 million.

"It is incomprehensible that HSBC chose this moment in time to replace BNP Paribas as a financial advisor to the project," stated Yann Louvel, climate and energy campaign coordinator for BankTrack. "Instead of drawing the lessons from the Fukushima catastrophe, reviewing its nuclear policy and stepping out of this dangerous sector altogether, HSBC is now involved in one of the worst nuclear projects around the world. We call on the bank to immediately step back and abandon the Belene deal."

In the aftermath of the nuclear disaster in Japan, MSCI has produced a report that analyzes the implications of the disaster from an environmental, social, and corporate governance (ESG) research perspective.

According to MSCI, "Decades-old company and government documents reveal that earthquake and tsunami risks were repeatedly hidden or understated by the public and private sectors."

"The chairman and president of Tokyo Electric Power resigned in 2002 after they admitted the company had falsified repair reports at its nuclear plants for more than two decades," the report continued.

While acknowledging "it is unlikely that the Japanese nuclear disaster will fully derail global expansion of nuclear power"—at present, nuclear power supplies 15% of global electricity—MSCI has identified four critical challenges facing the nuclear power industry.

Nuclear plant operators will have to demonstrate to regulators and the public that plants in seismic areas have sufficient safety procedures and effective community preparedness plans. Although the San Onofre and Diablo Canyon plants in California "are the only other currently-operating nuclear reactors sited near active fault lines," according to MSCI, many others, including the proposed Belene plant in Bulgaria, are located in areas of seismic activity.

In the US, according to a recent report by RepRisk, "The government is considering re-approving the operating license for the Diablo Canyon NPP, in spite of its being located close to a major fault line that runs along the California coast."

Despite the fact that nuclear power plants have been operating since 1954, the problem of spent fuel storage has never been adequately addressed. As MSCI noted, "On-site storage of spent nuclear fuel rods can pose as much of a safety hazard as a meltdown of the reactors themselves." Furthermore, limited nuclear fuel recycling capacity and resistance to off-site nuclear waste repositories have created an impasse that the US and Japan in particular have put off resolving for decades, according to the report.

Finally, any assessment of the economics of nuclear power will have to account for the costs of decommissioning retired or crippled plants as well as decontamination of surrounding areas in case of an accident such as that which occurred in Japan.

"More government subsidies will be needed to attract investment capital to sustain global nuclear expansion," the report concluded. However, the strategy of positioning nuclear power as an alternative to fossil fuels in an effort to mitigate climate change is also questioned in the report.

"Consider that Japanese coastal communities wiped out by the March 11 tsunami may yet again be covered by a sea level rise of up to six feet by 2100," the report stated. "The potential impact of carbon-generated climate change would not only cover those communities, but also reach all coastal cities around the globe."

Another impact of climate change that is already being felt is an increase in extreme weather events, which puts the safety of many nuclear power plants at even greater risk. A 2010 report by academic researchers details how heat waves, flooding, hurricanes, and rising sea levels have affected the operations of nuclear power plants in the US and France, and concludes, "Nuclear power is not and will not be a suitable (climate change) mitigation measure."


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