Report from the Commission - Third Progress Report on the implementation of the Chernobyl Shelter Fund December 2003 pursuant to Article 3 of the Council Decision 98/381/EC concerning the Community contribution to the European Bank for Reconstruction and Development for the Chernobyl Shelter Fund {SEC(2004) 919}
Date: 2004-07-14
Institutions: European Commission
Subjects: EBRD, EU aid, Ukraine, environmental protection, nuclear accident, nuclear safety, sensitive area

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 14.7.2004 
COM(2004) 481 final 

REPORT FROM THE COMMISSION 

Third Progress Report  
on the implementation of the Chernobyl Shelter Fund 
December 2003 

pursuant to Article 3 of the Council Decision 98/381/EC concerning the Community 
contribution to the European Bank for Reconstruction and Development for the 
Chernobyl Shelter Fund 

{SEC(2004) 919} 

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1. 

INTRODUCTION  

Following  the  accident  of  26  April  1986  the  Shelter  enclosing  the  remains  of  Chernobyl 
Nuclear  Power  Plant  (ChNPP)  Unit  4  was  constructed  under  exceedingly  hazardous 
conditions.  It  was  not  intended  to  be  a  permanent  solution  and,  in  fact,  it  is  increasingly 
unstable, it has deteriorated and allows the ingress of rainwater. There is a risk of collapse due 
to  seismic  disturbance,  extreme  weather  or  further  deterioration  of  the  structure  with 
possibility of contamination of the surrounding zone.  

In  May  1997  a  group  of  international  experts  from  the  EU,  USA  and  Japan  finalized  a 
multidisciplinary construction management program designated as the Shelter Implementation 
Plan  (SIP).  The  SIP  foresaw  to  carry  out  remedial  work  on  the  Shelter  directed  towards 
making it physically stable and environmentally safe. Under the management of the European 
Bank for Reconstruction and Development (EBRD), the Chernobyl Shelter Fund (CSF) was 
constituted to finance and implement the SIP. 

The initial cost estimate of the project (made in 1997) amounted to approximately USD 758 
million  (USD  768 million including the licensing  support) and a construction time of seven 
years  (1998-2005).  A  first  pledging  conference  was  held  in  New  York  in  November  1997. 
Twenty  five  countries  pledged  some  USD  400  million  including  Ukraine’s  USD  50  million 
in-kind contribution. This sum was sufficient to undertake work on the first tasks of the SIP. 
The project started effectively in April 1998 with the setting up of the Project Management 
Unit (PMU).  

The Council Decision 98/381/EC of 5 June 1998 concerning the Community contribution to 
the  European  Bank  for  Reconstruction  and  Development  for  the  Chernobyl  Shelter  Fund1 
represented  the  legal  basis  for  a  Community  contribution  to  the  CSF  of  a  USD  100  million 
pledge  made  at  the  1997  G7  summit  in  Denver.  This  was  paid  over  the  years  1999/2000 
within the TACIS financial envelope.  

A second pledging conference was held in July 2000 in Berlin. Some USD 320 million were 
pledged  by  twenty  two  countries  carrying  the  total  amount  pledged  in  the  two  conferences 
close  to  the  estimated  cost  of  768  million  USD.  The  Community  pledged  a  second 
contribution of 100 million euro which was approved by the Council decision 2001/824/EC2. 

According to Art. 3(2) of the Council Decision 98/381/EC, the Commission presented a first 
progress  report  on  the  implementation  of  the  CSF  in  October  19993,  a  second  report  was 
presented  in  September  20014.  The  present  report  updates  the  information  provided  in  the 
previous ones based mainly on the progress communicated to the Assembly of Contributors 
by  the  EBRD.  Further  details  are  provided  in  the  Commission  Staff  Working  Document 
SEC(2004) 919. 

1 
2 
3 
4 

OJ L 171, 17.6.1998, p. 31  
OJ L 308, 27.11.2001, p. 25 
COM(1999)470 of 12.10.1999 
COM(2001)251 of 29.05.2001 

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2. 

THE SHELTER IMPLEMENTATION PLAN 

The purpose of the SIP is to bring the existing Shelter to an environmentally safe condition 
and to remove the potential problems of collapse and continued water ingress. To achieve its 
objective the SIP addresses five major goals in parallel: 

1. 

2. 

3. 

4. 

5. 

Reduce the potential for collapse of the Shelter; 

Reduce the consequences of a Shelter collapse, should one occur; 

Improve the nuclear safety of the Shelter; 

Improve worker industrial safety and environmental protection at the Shelter; 

Conversion to an environmental safe site. 

The SIP will lead to a solution which will create a safe confinement and stabilisation of the 
current structure for at least several decades until optimum conditions may be created for the 
ultimate disposal of the radioactive material contained under the shelter.  

3. 

WORK IMPLEMENTATION 

In  1996  an  International  Group  of  Experts  elaborated  a  study  of  alternative  solutions  to 
convert  the  Chernobyl  unit  4  and  its  present  shelter  (Ukritiye)  into  an  environmentally  safe 
condition. The study5 proposed a Recommended Course of Action comprising three phases:  

Phase 1: Stabilization and other short term measures; 

Phase 2: Preparation for conversion into an environmentally safe site; 

Phase 3: Conversion into an environmentally safe site. 

So far, project implementation was related essentially to Phase I, which was made up of the 
following elements: 

•  Consolidation  and  re-evaluation  of  the  existing  Shelter  knowledge  base  and  execution  of 

new surveys as a basis for the design and remediation works; 

•  Execution of option studies and preliminary engineering to determine the technical strategy 
for  both  structural  improvements  and  engineering  safety  systems  for  implementation  in 
Phase II; 

•  Establishment  of  a  technical  infrastructure  for  the  implementation  activities  in  Phase  II 
comprising a contractors' operational base and the procurement of safety related equipment 
and systems; 

•  Repair  of  the  main  roof  support  beams  B1/B2  to  remove  the  most  significant  risk  of 

structural collapse. 

5 

“Chernobyl  unit  4  –  short  and  long  term  measures  –  final  report”,  Tacis  Services,  DGIA,  European 
Commission, Brussels, November 1996. 

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All tasks related to Phase I of the project have been completed. A major project review was 
held  at  the  conclusion  of  Phase  I  corresponding  to  the  SIP  Programmatic  Milestone  P1,  at 
which  stage  the  technical  strategy  for  stabilization  and  confinement  in  phase  II  were 
determined. Phase II (preparation for conversion into an environmentally safe site) started in 
May 2003. 

4. REVISED SCHEDULE AND COST ESTIMATE 

4.1 New Safe Confinement Schedule  

During the CSF assembly in Slavutych in July 2003, the PMU presented the revised schedule 
for  the  completion  of  the  NSC.  The  design  team  estimated  that  the  detailed  design,  the 
process concerning the approval of both the concept and detailed design and the construction 
of the NSC will take 5 years. 

The major milestones are summarized as follows: 

•  Schedule  starts  with  delivery  of  Conceptual  Design  Report  and  Sanitary  Compliance 

Report (December 2003). 

•  Design activities 

–  Detailed design - 1 year  

–  Regulatory approval – 1 year in 2 phases 

•  Construction Activities – 3 years  

•  NSC commissioning – 3/4th quarter 2008. 

It was pointed out that the overall schedule is ‘aggressive’. The completion of the project with 
the  commissioning  of  the  NSC  by  the  3rd  quarter  of  2008  does  not  include  provision  for 
contingency.  The  major  risks  of  delays  concern  the  approval  and  decision  process  and  the 
availability of resources to execute the project. 

The NSC will provide the facility for further deconstruction work and the removal of the Fuel 
Containing  Material  (FCM)  which  will  continue  well  beyond  2008.  However  the  Bank 
considers that most of this work is beyond the scope of the present project. Deconstruction of 
the existing structure is not considered within the current schedule, it is estimated that it will 
take at least another 4 to 6 years to complete. 

4.2 Revised Cost Estimate 

During  the  Assembly  of  Contributors  in  London  on  2  December  2003,  The  EBRD  made  a 
presentation of the revised cost estimates and current situation of the CSF. The cost estimate 
of USD 1059 million (995 million plus USD 64 million for potential additional work) was the 
first one based on actual design work, which will replace the original SIP estimate6. A better 

6 

In its CSF Report on Financial Situation and Requirements of 7 April 2004 the Bank provided a new 
SIP cost estimate of USD 1091 million. 

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cost estimate will only become available once the market response for the largest element (the 
New  Safe  Confinement)  has  been  received.  According  to  the  Bank,  the  current  estimate 
contains conservative assumptions with regard to escalation, contingency and risk.  

It was recalled that the PMU estimate is in 2003 USD, as opposed to the original SIP figure 
which  was  in  1997  USD.  Furthermore,  the  PMU  consortium  estimate  includes  conservative 
projections  for  the  contingency  for  the  New  Safe  Confinement7,  escalation  and  risk  (USD 
194.242 million) as  well a USD 28 million allocation for required work not included in the 
1997 SIP estimate (removal of the ventilation stack, interim radwaste storage and the Owner’s 
Engineer).  

The Bank pointed out that, without the contingency for the NSC, escalation and risk and the 
allocation for the required work not included in the 1997 SIP estimate, the 2003 baseline cost 
(USD  772.832  million)  compares  very  closely  to  the  1997  SIP  estimate  (USD  758.168 
million). 

5. 

FINANCIAL OVERVIEW  

The total sum pledged to the CSF at the conferences of New York in 1997 and Berlin in 2000 
amounted  to  some  USD  717  million  (€754  million  based  on  the  exchange  rates  of  2000), 
including Ukraine’s in-kind contributions of USD 50 million. Following the pledges, as at 31 
October 2003 the contribution agreements between the Contributors and the EBRD amount to 
some €615 million. The payments received to the CSF totalled some €480 million by the end 
of November 2003. 

Although  a  large  part  of  the  fund  is  still  uncommitted,  the  Bank  indicated  that  there  is  a 
possible  shortfall  when  considering  the  initial  pledge  of  some  USD  717  million  and  the 
current  cost  estimate  by  the  PMU  consortium  for  the  project,  which  amounts  to  USD  995 
million. The shortfall would amount to some USD 278 million, plus possibly USD 64 million 
for potential additional work concerning deconstruction activities. However these figures are 
still under review.  

The  Bank  indicated  that  additional  commitments  need  to  be  made  available  for  the 
effectiveness  of  the  future  grant  agreements  for  the  New  Safe  Confinement,  currently 
scheduled for the fourth quarter of 2004. Contributors are likely to be called again in the near 
future  to  make  new  contributions  for  the  completion  of  the  project.  However  no  new 
payments into the fund would be required before 2005, these should be planned in principle 
for the 2006-2007 timeframe.  

The Bank was requested to prepare a report detailing all funds needed for Chernobyl: Nuclear 
Safety  Account,  radioactive  waste  management  and  the  SIP.  Details  on  when  the 
commitments and disbursements are to be made should also be provided.  

7 

Contingency had been included in the Baseline Costs, except for the NSC. 

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6. 

SUMMARY OF DEVELOPMENTS AND CONCLUSIONS 

The  EBRD  reported  a  good  performance  of  the  PMU  following  its  reorganisation  in  2002. 
Phase  I  of  the  SIP  (stabilization  and  other  short  term  measures)  is  complete  and  Phase  II 
(preparation for conversion into an environmentally safe site) has started.  

The  situation  with  the  nuclear  regulator  (SNRC)  has  improved  during  the  reporting  period. 
However regulatory approvals remain one of the major risks as they are on the critical path or 
are  closely  linked  to  activities  which  have  the  potential  to  become  critical.  It  is  therefore 
essential that SNRC continues to be provided with the required level of support to ensure that 
delays are avoided and a proper regulatory and licensing process is fully implemented. 

A  co-ordinated  approach  to  the  overall  waste  problem  is  being  developed  which  requires  a 
strong  involvement  of  the  Ukrainian  authorities.  In  particular  a  solution  for  the  high  level 
radioactive solid wastes needs to be worked out. For this class of waste it has been proposed 
to  rely  on  part  of  the  EC  funded  Industrial  Complex  for  Solid  Radwaste  Management 
(ICSRM)  project  originally  dedicated  to  the  decommissioning  of  the  Units  1  to  3.  This  is 
under  investigation  but  will,  in  any  case,  imply  additional  cost  and  delays.  The  TACIS 
Nuclear Safety programme may have to assist in supporting these additional costs.  

The schedule for the completion of the Shelter Implementation Plan, which had been foreseen 
for 2007, is significantly delayed. The completion of the project, with the commissioning of 
the New Safe Confinement, is now foreseen for 3/ 4th quarter 2008. 

The baseline cost of the project did not increase significantly, however, inclusion of required 
works  not  foreseen  in  the  initial  budget  (€28  million),  potential  additional  works  (€64 
million),  addition  of  escalation,  risk  and  contingency  (€194  million),  may  bring  the  total  to 
over 1 billion euro. 

Considering that the pledges during the two donors’  conferences  amount  to  some  UDS  717 
million,  there  is  currently  a  shortfall  for  completion  of  the  project  in  the  order  of  USD  278 
million (excluding €64 million for potential additional works).  

The  EBRD  will  require  new  commitments  from  contributors  prior  to  the  signature  of  the 
contract  for  the  New  Safe  Confinement,  which  is  currently  scheduled  for  the  fourth  quarter 
2004.  However  the  payment  of  the  new  contributions  would  only  probably  be  required  by 
2006-2007. 

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