VZCZCXRO3458
RR RUEHSK
DE RUEHBR #0533/01 1201422
ZNR UUUUU ZZH
R 301422Z APR 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4160
INFO RUEHSO/AMCONSUL SAO PAULO 3934
RUEHRI/AMCONSUL RIO DE JANEIRO 7625
RUEHRG/AMCONSUL RECIFE 9428
RUEHBU/AMEMBASSY BUENOS AIRES 6192
RUCNNSG/NUCLEAR SUPPLIERS GROUP COLLECTIVE

UNCLAS SECTION 01 OF 02 BRASILIA 000533 
 
SENSITIVE 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: KNNP ENRG TRGY FCS BR
SUBJECT: AFTER 23 YEARS, BRAZIL RESUMES WORK ON ANGRA III NUCLEAR 
REACTOR 
 
BRASILIA 00000533  001.2 OF 002 
 
 
(U) THIS CABLE IS SENSITIVE BUT UNCLASSIFIED AND NOT FOR INTERNET 
DISTRIBUTION. 
 
¶1.  (SBU) SUMMARY.   More than two decades after halting 
construction of Brazil's third nuclear reactor at Angra dos Reis, 
the Brazilian Government has resumed work.  The estimated cost for 
completing the construction of Angra III has jumped from USD 1.8 
billion in 1986 to USD 3.3 billion.  The government has decided to 
use the same contractor - Andrade Gutierrez - that won the contract 
initially in 1983. Areva and Siemens will provide the 
instrumentation and control equipment.  END SUMMARY. 
 
REVIVED AFTER 23 YEARS 
 
¶2.  (SBU) On April 29, the President of the state-owned nuclear 
power company Eletronuclear, Othon Luiz Pinheiro da Silva, confirmed 
to the Environment, Science and Technology, and Health (ESTH) 
Counselor that Brazil has resumed construction of Angra III.  This 
is the third reactor to be built at Angra dos Reis, State of Rio de 
Janeiro, at the Central Nuclear Almirante Alvaro Alberto (CNAAA) 
complex.  In 1983, the contractor, Andrade Gutierrez, won the bid to 
build Angra III, which was expected to cost USD 1.8 billion to 
complete when work was halted in 1986.  Today, the cost is estimated 
at about USD 3.3 billion.  The reactor is expected to come on line 
by 2014, and it is projected to generate about 1,350 MW. 
 
¶3.  (SBU) Construction of the first reactor (Angra I) began in 1972, 
and the reactor went on line in 1985 producing 657 MW.  Work on 
Angra II began in 1976, but the government scaled down its efforts 
to complete the reactor in 1983 due to budgetary problems.  In 1991, 
however, the Brazilian Government resumed construction of the 
reactor, and it went on line in 2001 producing 1,350 MW.  In 1984, 
construction on Angra III began, however, work was halted in 1986 
due to doubts surrounding the safety and viability of nuclear power, 
as well as the high cost of the project. Since then, the government 
reportedly has paid about USD 20 million a year to maintain the 
reactor's construction site, equipment, and storage facilities. 
 
¶4.  (SBU) The Brazilian Government envisions a significant increase 
in electricity generated from nuclear power plants.  In its National 
Energy Plan 2030 and also its 10-Year Energy Plan 2016, the 
government calls for an increase in nuclear generating capacity from 
2,007MW today to over 3,000MW with Angra III, and then adding 4,000 
to 8,000MW more by 2030.  There is already a scramble among the 
states of the Northeast for hosting one or more of the future 
reactors. 
 
THE CONTRACTING 
 
¶5.  (SBU) In September 2008, the National Council on Energy Politics 
(Conselho Nacional de Politica Energetica CNPE) decided that 
Eletronuclear could use the original contractor - Andrade Gutierrez 
- to resume construction of Angra III.  Avera and Siemens will 
supply the instrumentation and control equipment for the plant. 
Areva is the result of the merger between the German company 
Siemens-KWU and the French company Framatome.  The total cost to 
complete the reactor is estimated at USD 3.3 billion.  In March 
2009, the Brazilian environmental protection agency IBAMA approved 
the reactor's building licenses, completely opening the road for 
construction to begin.  Earlier, the National Commission on Nuclear 
Energy (CNEN) had determined that the permission granted in 1983 to 
go forward with Angra III was still valid. 
 
¶6.  (SBU) During the first phase of construction in the 1980's, 
Eletronuclear purchased millions of dollars in reactor parts such as 
tanks, tubing, and valves, which have been in storage and will now 
be used as construction restarts.  Eletronuclear intends to 
renegotiate the original contract with Areva and Siemens for 
instrumentation and control systems.  Pinheiro said that the 
suppliers had not provided the instrumentation and control equipment 
before construction was halted, which means they can just obtain 
modern versions rather than be forced to choose between out-dated 
equipment and paying twice.  Almost all the other equipment and 
supplies were purchased during the original building phase (and used 
or stored), or will be provided by Brazilian producers.  While there 
does not appear to be opportunities for U.S. firms to bid on work on 
finishing Angra III, there should be other openings as Brazil 
implements its plan to build new reactors. 
 
¶7.  (SBU) The issues of the reactor's costs and contract agreements 
have sparked debate.  As part of CNPE's decision to allow 
construction to resume, the Brazilian Government Accountability 
Office (Tribunal de Contas da Uniao, TCU) decided to revalidate the 
original building contracts signed back in 1983 between contractor 
Andrade Gutierrez and then Brazilian dictator Joao Baptista 
Figueiredo, rather than open the construction job back up for 
 
BRASILIA 00000533  002.2 OF 002 
 
 
rebidding.  Further, the press notes the close ties between Andrade 
Gutierrez and President Luiz Inacio Lula da Silva's party - the 
Workers' Party (PT).  Andrade Gutierrez reportedly is a leading 
donor to the PT. In response, Brazilian officials claim that 
honoring the original contracts is an important aspect of 
maintaining the rule of law in Brazil and following good business 
ethics.  The press also has questioned whether antiquated equipment 
and construction plans could lead to hazardous working conditions 
and problems with the general safety of the reactor.  Pinheiro told 
ESTH Counselor that the equipment they have already purchased, such 
as pumps and valves, has retained its value, while the equipment 
they had not yet received was the more sensitive instrumentation and 
controls.  In that case, Eletronuclear will use a proven, modern 
version of this equipment, though he wasn't looking for the absolute 
latest or cutting edge versions. 
 
¶8.  (SBU) COMMENT.  It appears that the Brazilian Government now has 
an open path to completing Angra III.  Obtaining the IBAMA license 
to construct and getting permission to revive the initial contract 
mean that substantial progress can be made this year.  Building the 
other future reactors will be more challenging.  This will require a 
CNEN license, an environmental license from IBAMA, and completing 
the procurement process.  It is noteworthy that despite Environment 
Minister Carlos Minc's strong anti-nuclear sentiments, his agency - 
IBAMA - gave the green light for Angra III.  END COMMENT. 
 
SOBEL