US embassy cable - 05TAIPEI2703

UNCLAS SECTION 01 OF 02 TAIPEI 002703 
 
SIPDIS 
 
SENSITIVE 
 
STATE PASS AIT/W 
STATE FOR EAP/RSP/TC, AND NP/NE - BURKHART, STATE PLEASE 
PASS AIT/W AND USTR - WINELAND, USDOC FOR 3132 ITA/CS/DRD 
EAP JHAMILTON, 3005/ITA/CS/ADVOCACY CENTER BLOPP AGELFUSO, 
AND FOR 440 ITIA/MAC/OP/M-BMORGAN 
 
E.O. 12958: N/A 
TAGS: KSCA, TRGY, ENRG, BEXP, TW 
SUBJECT: DRY-STORAGE CASKS:  TAIWAN POWER WILL COMPLY WITH 
REGULATIONS 
 
REF: A. TAIPEI 2669 
 
     B. TAIPEI 2474 
     C. SECSTATE 99089 
     D. TAIPEI 2250 
     E. TAIPEI 2601 
 
1.  (SBU) SUMMARY: On June 17, AIT/T met with Edward K. Chen, 
Acting Chairman and President of Taipower, to deliver reftel 
talking points regarding nuclear safety issues and Taiwan's 
tender for dry-storage casks.  In addition to the nuclear 
safety issues, AIT/T emphasized Washington agencies' concerns 
regarding the potential conflict of interest in the 
procurement process as well as the lack of transparency in 
the process.  Chen said that he shares the US view that 
safety is of the utmost concern and he believes that Taiwan's 
Atomic Energy Commission also shares this view.  He said that 
the ceiling price set by Taipower is reasonable and based on 
market surveys while the prices that have been offered have 
been much higher than expected.  Chen said that Taipower 
needs to quickly move forward to secure storage facilities 
because of the shortage of storage space remaining at the 
Chinshan nuclear power plant.  END SUMMARY. 
 
2.  (SBU)  On June 17, AIT/T Economic and Commercial Chiefs 
met with Edward K. Chen, Acting Chairman and President of 
Taipower, to deliver reftel talking points regarding nuclear 
safety issues and Taiwan's tender for dry-storage casks for 
low-level nuclear waste.  In addition to the nuclear safety 
issues, AIT/T emphasized Washington agencies' concerns 
regarding the potential conflict of interest in having the 
Institute of Nuclear Energy Research (INER) enter into a 
sole-source contract with Taipower to provide the casks, when 
INER is controlled by Taiwan's nuclear regulator, the Atomic 
Energy Commission (AEC).  AIT/T briefly reviewed the 
procurement history of two current tenders by Taipower:  the 
dry-storage casks and a separate one on control-rod reduction 
services.  AIT/T Commercial Chief had discussed these tenders 
in a previous meeting with Chen. 
 
Safety is of Utmost Concern 
--------------------------- 
3.  (SBU) Chen said that he shares the US view that safety is 
of the utmost concern.  He said that he believes that the AEC 
also shares this view.  Chen said Taipower's only objective 
is to secure safe, long-term storage for the spent fuel at 
Chinshan nuclear power plant.  He said Taipower needs to take 
action soon to prepare for when the Chinshan on-site storage 
capacity is reached.  He remains convinced that the best way 
to accommodate Chinshan's storage requirements is to proceed 
with the current approach to have INER supply the dry-storage 
technology.  Chen added that dry storage is a passive 
activity and a relatively low risk solution. 
 
Tender Price Unreasonably High 
------------------------------ 
4.  (SBU) Chen noted that there are at least one or two US 
firms interested in the cask tender and that one of them is 
aggressive and greedy.  He said that the price quoted by the 
firm is much higher than expected and well above the ceiling 
price, which was based on a market survey.  He said that 
Taipower believes the ceiling price established in the tender 
is very reasonable.  Chen said, "taking Holtec as an 
example," Taipower can never accept the high price being 
proposed.  AIT/T responded that we are not advocating on 
behalf of any one company.  Rather, we said AIT/T is focussed 
on the nuclear safety issue of the proposed project and 
therefore is in favor of using proven technology rather than 
a new approach.  We also noted US concerns over the 
procurement process in this case, noting our view that the 
project should be transparent.  Chen said Taipower will use 
proven US technology and strictly follow US Nuclear 
Regulatory Commission licensing procedures as implemented by 
Taiwan's AEC.  Chen said that Taipower will comply with 
Taiwan's procurement law in all respects and that any 
tenders, including by INER, will be done through a public, 
open bid process.  Finally, he claimed that under the terms 
of Taiwan's government procurement law, officials cannot 
announce the companies that have bid on a project. 
 
5.  (SBU)  Comment:  Taipower's primary focus seems to be the 
timeline for completing the Chinshan dry-storage project. 
Chen believes that Taipower cannot afford the time that would 
be required to rebid the entire project.  AIT/T has now 
presented ref C points to all of the relevant players in the 
dry-storage project.  The AEC, INER and Taipower have all 
affirmed that safety is their primary concern and that they 
will all comply with US NRC licensing requirements and 
Taiwan's Government Procurement Law in this project.  End 
Comment. 
PAAL