Czech nuclear envoy says decisions on new units needed by Q1

PRAGUE (Reuters) - The Czech government should decide early next year how to build and fund new nuclear reactors to replace coal-fired and nuclear units that will shut down over the next two decades, the country's special envoy for nuclear energy said.

Options include utility CEZ, which is 70 percent state owned, making the investment with some form of state support or the state providing the funding and potentially taking over some company assets, Jan Stuller told Reuters.

Developing new nuclear sources has political support in the European Union nation but low electricity prices due to a rise in renewables have made financing projects difficult.

A lack of government support scuppered a CEZ tender to build new reactors in 2014 and the frontrunner for prime minister in the upcoming October election -- former finance minister Andrej Babis -- has spoken out in the past against state aid for such projects.

But with shortages in domestic power production forecast to begin in the 2030s, Stuller said the government needs to act soon.

"A decision needs to be taken in the first quarter of 2018 so we can - although narrowly -- meet the timeline, with the most important date being hooking up the first new unit to the grid in 2035," he said.

CEZ could invest in new reactors with some form of state backing or the government could take over the project by acquiring special purpose vehicles which the utility has already created to prepare the projects, Stuller said.

A third option could involve the government taking over a larger chunk of CEZ and creating a state-owned firm to build the nuclear power plants.

Prime Minister Bohuslav Sobotka said in June that the state taking over CEZ's nuclear assets was an option.

CEZ is expected to present its view to an inter-departmental nuclear energy committee later this month, Stuller said.

"I do not expect a concrete proposal but some signal as to whether it is really a serious issue or something marginal," Stuller said.

"If it should be an option different to the option of taking over an SPV, then it would of course be something larger."

Any split up of CEZ would follow the footsteps of big European utility's such as E.ON, which have hived off traditional assets from renewable business and networks.

CEZ, which declined to comment on any details of the proposed options, operates six nuclear units at its Dukovany and Temelin power stations in addition to coal, gas, hydro and renewable plants.

Czech media have reported possible suppliers that have shown interest include South Korea's KHNP, China's General Nuclear Power, Russia's Rosatom, France's EDF and ATMEA, a joint venture between Japan's Mitsubishi Heavy Industries and France's Areva.

(Editing by Michael Kahn and Jason Neely)