THE push to replace Australia's Lucas Heights reactor has hit more problems, and the Argentinian company chosen to build and manage the reactor is under investigation for potential constitutional breaches and alleged corruption.

The proposed replacement reactor is also facing trouble at home after a nuclear safety committee found the construction plans failed to adequately address key issues of radioactive waste management, nuclear waste storage and the proposed fuel source.

Argentinian federal prosecutors are examining the $326million contract between the Argentine firm, INVAP, and the Australian Nuclear Science and Technology Organisation, which demands Argentina accept nuclear waste from the proposed new reactor. Argentina's constitution states that "entry to the national territory of waste currently or potentially hazardous, and of those radioactive, is prohibited''. Prosecutors are also investigating the relationship between INVAP's chief executive and the head of Argentina's Nuclear Regulatory Authority amid allegations the NRA rubber-stamped the firm's contract. ANSTO said it was "closely monitoring the situation''.

Democrats energy spokeswoman Lyn Allison warned that ANSTO could be forced to store nuclear waste on-site at Lucas Heights if the investigation found the contract was unconstitutional.

ANSTO has been told it must set up a contingency plan for reprocessing and disposing of spent fuel in case plans to ship it overseas fall through. Greenpeace nuclear campaigner Stephen Campbell said the reactor plan must be put on hold. "It is clear INVAP are in big trouble in Argentina, legally and financially, and it would be negligent of the federal Government to proceed with the project with these matters pending.''

The country's nuclear regulator is investigating why it was not told about a $10.5 million prop-up loan by the bankrupt Argentine government to the company contracted to build the new Lucas Heights reactor.

And it wants to know why it took until last week for its chief executive to learn of the deal - on radio.

John Loy, the head of the Australian Radiation Protection and Nuclear Safety Agency, hopes to have made a decision about whether to grant a construction licence to the Argentine company INVAP by the end of this month.

But this week he said the contingency loan, which was first confirmed by the Government in Parliament this week, was "something about which we have asked questions".

Of concern is whether INVAP will be able to fulfil its obligations to see the project through.

"We want to understand [the loan] and make sure it's consistent with our understanding about INVAP's capacity," Dr Loy said.
Asked how he first learnt about the loan, he replied "on [the ABC radio program] AM". Just why the regulator was never told about it by INVAP or the reactor's operator, ANSTO, was "one of the questions we're asking", he said.

The Government said the project was still on track - the contract for the $290 million reactor was signed in July 2000 and the reactor is due to be built by 2005.

A spokesman for the Science Minister, Peter McGauran, said the minister was satisfied ANSTO was "on top of things and, yes, confident [the reactor] will go ahead if of course ARPANSA grants the licence".

ANSTO maintains it is in "close consultation with INVAP concerning the Argentine currency crisis" and is satisfied it "has not impaired INVAP's capacity to fulfil its obligations under the contract".

But the Opposition and Green groups are calling for the project to be halted because of what Labor has described as a "serious cash-flow crisis as a result of Argentina's financial meltdown", as well as concerns about the operator's plans for disposal of nuclear waste - another issue ARPANSA is investigating as part of its licence decision.

Labor called this week for the Government to produce contractual and financial documents relating to the operator and the construction company.

The financial crisis crippling Argentina is seriously denting its scientific capacity and casting doubts on the viability of the government’s nuclear firm, INVAP, to build a replacement research reactor for the Australian Nuclear Science and Technology Organisation (ANSTO). Argentina’s difficulties were already apparent when INVAP won the $286 million contract in July 2000.

In the first reaction from the government, a spokesperson for Science Minister, Peter McGauran, said: “We are keeping a close eye on things in Argentina” and claimed, from Australia’s diplomatic and technical monitors there, that “there has been no indication to date of any effect”.

McGauran’s senior, the Minister for Education, Science and Training, Dr Brendan Nelson, was similarly reassuring, saying: “INVAP’s activities under the contract are fully-funded by the contract payments and are therefore not dependent on cash flow from the Argentine government”. In Argentina INVAP was saying things along the same lines.

Yet other reports from Argentina tell a different story. Raul Montenegro, professor in evolutionary biology at the National University of Cordoba (which had frozen payment of salaries) and president of the Environment Defense Foundation (FUNAM), asserts: “As Argentina became bankrupt, the government cannot help INVAP for achieving its contract with ANSTO”.

The heavy devaluation of the peso may not formally affect the cost to Australia as the contract was written partly in Australian and US currencies. But it remains questionable whether INVAP, its parent the National Commission for Atomic Energy and the latest Argentine government can underwrite the substantial extra cost to them of importing necessary materials and equipment.

Montenegro disputes INVAP’s claims that it has sufficient capital reserves despite government cuts and staff reductions last year. He cites public reports of the provincial government of Rio Negro transferring its financing of INVAP to the Bank of Investment and Foreign Trade, a move he says “demonstrates that INVAP has no independence of government nor self-capacity for funding”.

A Senate inquiry into the contract last year expressed serious reservations about the need for a new reactor, was highly critical of secrecy by the government and ANSTO, and called for an open review, a move immediately rejected by the Science Minister at the time, Senator Nick Minchin. ANSTO had opted for INVAP in place of strong bids by long-standing nuclear constructors from Europe such as Siemens and Technatome, which complained to the inquiry about their treatment. Tony Wood, a retired nuclear engineer at ANSTO, told the inquiry that INVAP has “a poor record”, having built only one similar 20 megaWatt reactor in Egypt.

A decision on licensing the construction of the new reactor is due imminently following examination of plans by the Australian Radiation Protection and Nuclear Safety Agency (ARPANSA). A prominent issue is uncertainty about the disposal of the reactor’s spent fuel, which is meant to be a pre-condition for licensing.

When arrangements for reprocessing the fuel through facilities in the UK or France became problematic, the Australian government arranged, as a back-up measure, for INVAP to accept waste for some “reconditioning” before returning it for storage somewhere in South Australia. While the State government opposes its land being used as a waste dump, Minchin threatened that Commonwealth land could be used to bypass the State’s objections.

There are misgivings about the technical experience of INVAP to deliver a technology that is new to them, and FUNAM is challenging the legality of importing radioactivity into Argentina.

ARPANSA’s CEO, Dr John Loy, says he “needs to be satisfied there has been substantial progress” on plans for waste before issuing a licence. Commenting on the Argentine crisis he said he also “needs to be satisfied that INVAP can carry out its obligations from beginning to end”. Loy’s powers are being queried by environmentalists on the grounds that ARPANSA is an agency within the Health Department of the government that is applying for the licence, but ministers continue to describe him as “the independent regulator”.

LINDA MOTTRAM: The Argentinian company which won the contract to build Australia's second nuclear reactor appears to be in deep financial difficulty. Construction company INVAP has sought a $10 million bailout loan from the Argentinian government and while the money was approved in a long delayed budget delivered earlier this week, there are grave doubts that the struggling government of the South American nation can ever deliver the money. Peter Lloyd reports.

PETER LLOYD: Construction of a new reactor at Lucas Heights, on the southern edge of Sydney, was due to begin last month but the nuclear regulator ARPANSA [Australian Radiation Protection and Nuclear Safety Agency] still hasn't given the green light. Across in Argentina, the delay has triggered something akin to a cashflow crisis for construction company, INVAP, which was already caught up in the basket case economy of South America. Much to the ire of campaigners opposed to the country's involvement with the Australian nuclear project, Argentina's government obliged, by including a $10 million loan facility in the budget brought down earlier this week. Emiliano Ezcurra is from Greenpeace.

EMILIANO EZCURRA: I think it's a move to deceive Australia that INVAP has chances to go on with this business.

PETER LLOYD: In January Argentina defaulted on $140 billion in debt and devalued the peso. The jobless rate soared to more than 20% and the nation's poorest began spilling out of the slums and into the streets of the capital. Against that backdrop, Greenpeace Argentina is now mounting a campaign to stop millions going to bail out a nuclear construction company.

EMILIANO EZCURRA: I mean there is no money for critical medicine for people who are dying in hospitals and there is no money for education. There is no money for food for family relief.

PETER LLOYD: The money for INVAP was part of a budget rushed through in time to satisfy the International Monetary Fund, which has arrived in Argentina to consider unlocking billions in foreign aid. Greenpeace suspects the whole budget is rubbery and doubts INVAP will ever see the money.

EMILIANO EZCURRA: It is not a serious budget. It is not something that will happen or that has a chance to happen because that money is just not there and they did that so that they could negotiate with the IMF for help for Argentina.

PETER LLOYD: In any event, the budget loan to INVAP comes as a surprise to the operators of Lucas Heights. Garry Seaborne is the interim project manager for the new reactor.

GARRY SEABORNE: INVAP were financially viable when we went into the contract and there's nothing that we've seen since, with our active and ongoing monitoring of them, to say that they're unviable.

PETER LLOYD: You say you're monitoring them, how?

GARRY SEABORNE: Through normal commercial risk management processes.

PETER LLOYD: But does that mean that you're taking their assurances at face value or . . .

GARRY SEABORNE: No, we're not taking, no, no we're not taking their assurances at face value.

PETER LLOYD: If they're financially viable, what do you imagine they'd need $10 million for?

GARRY SEABORNE: Well I'm not aware of the report and I can't comment.

Invap recorded its lowest sales in 1999, earning just US$26 million, down from US$47 million in 1996.

“Invap is a company which obtains most of its income from large projects, and a slight slump is normal after one such project has been completed”, Invap’s chief executive, Hector Otheguy, told the August 17, 2000 Sydney Morning Herald.

Although it promotes itself as self-funding, Invap approached the Argentine government in 1999 for a US$132 million grant to assist in the development of a Carem prototype power reactor. The request was rejected, in part because of strong opposition from the broader scientific community.

Greenpeace denounced that the Deputy Chamber approved an article in the National Budget in which the company INVAP is granted with 12 million pesos as "prefinancing" for the works linked to the contract with the Australian company ANSTO. The contract has been questioned by environmental groups because it implies the entrance of nuclear wastes to the Argentina, in a clear violation to the National Constitution.

INVAP signed a commercial contract with ANSTO on July, 2000, and it's objective is to construct a nuclear research reactor in Australia, which was questioned when it was discovered that it committed Argentina for the entrance of the wastes produced by that reactor.”

Later contact with Argentina revealed that the 12 million pesos given to INVAP in the budget is a loan not a grant. Therefore an essentially unviable company is being 'propped up' by a bankrupt government. How long can this go on?

Lucas Heights joins Argentinean meltdown.

"Australian taxpayers are once again being held hostage to financial losses from another botched Government project," said Senator Kim Carr, Shadow Minister for Science and Research.

"The recent announcement that INVAP S.E., the Argentinean head contractor for the construction of the proposed new reactor at Lucas Heights, has sought a $10 million bailout from the Argentinean Government seriously undermines assurances provided to Parliament about the financial stability of INVAP and, indeed, the entire project.

"The future of this $280 million project is now apparently dependent on the largesse of a government that is in a state of financial collapse.

As recently as late February the head of the Australian Nuclear Science and Technology Organisation, Professor Helen Garnett, unequivocally stated that she believed INVAP to be secure. "We do not believe that there have been any adverse impacts on INVAP's ability to undertake the project. INVAP are not underwritten by their Government in any way," she told a Senate Estimates hearing.

"Despite today's claim to the contrary by the project's interim manager, Professor Garnett also made it clear to the Senate Committee that neither ANSTO, nor the Government, have conducted any effective prudential monitoring of INVAP since Argentina's financial meltdown in January," said Senator Carr.

"Can the Minister for Science confirm for how long the Government has been aware of INVAP's financial predicament and will he guarantee that emergency relief for INVAP will not involve further Australian funding?

"INVAP's financial crisis is the latest embarrassment in a badly handled project. Not only is the community value of this project under question, but also safety and environmental management issues remain to be resolved. To cap it off, in the face of national hostility, this government is yet to identify a site for secure waste storage.

"It is time that this project is put on hold while financial, environmental and safety concerns are resolved," said Senator Carr.