Costs of nuclear: Russia sees greater opportunities for private financing


Following the recent launch of the report – Unlocking Reductions in the Construction Costs of Nuclear: A Practical Guide for Stakeholders – prepared by the Organisation for Economic Cooperation and Development (OECD) arm, the Nuclear Energy Agency (NEA), which says nuclear power can play a significant role, both in the near-term as part of the recovery from the COVID crisis, as well as in the long-term to meet environmental and energy security targets, the London-based World Nuclear Association (WNA) followed up last week with their eForum on driving investment towards nuclear projects.

Speaking at a WNA eForum 2020 panel, the Russian state atomic energy corporation Rosatom’s Chief Financial Officer (CFO) llya Rebrov noted that, unlike in the past, attracting private financing to new-build projects has become “the top priority for the industry now”. Till a decade ago, Rosatom would offer the industry the option of an engineering, procurement and construction (EPC) contract alongwith the essential regulatory framework services, but over time, the company’s integrated offer began to include the “build-own-operate” model.

“Nuclear construction projects were typically implemented under state protection and, in rarer cases, private investors could be invited to participate in such projects. Nevertheless the situation is changing now and at present we can really acknowledge that the market for new-build will be much broader, and in the case of the integrated offer of Rosatom, would be supplemented with the financing or co-financing of the project,” Rebrov said.

“I believe that most new projects in nuclear and other segments of power generation could be implemented with full project financing. It requires quite extensive leverage, the loan could be up to 70 percent of the total package or even more, the project’s operational cashflow is the main source of investment repayment, all project risks have mitigation measures, and investment is secured by the project company’s pledged assets,” he said.

The OECD report released in July said that the cost of building large nuclear plants has become a major barrier, with cost overruns and long delays leading even to project failures. It said that high costs and project delays are not inherent deficiencies of nuclear technology but a reflection of weak supply chains and a lack of recent construction in western OECD countries.

At the WNA’s Strategic eForum last week, the Eletronuclear CEO Leonam dos Santos Guimarães indicated that driving investment towards nuclear energy projects depends strongly on the perception and evaluation of the costs associated with them.

According to Rebrov, the first main challenge for potential investors is of overcoming their reluctance to embark on the long investment phase associated with a new-build project. The project developer needs to satisfy the investor’s need for adequate security. “Nobody wants to accept such a long period, but the phase of uncertainty is much smaller than the overall period of the undertaking,” he said.

“Everybody wants state guarantees and all kinds of state security, and in a larger number of instances we have some power purchase agreements, contracts-for-difference and some other agreements that can be used as security. We also use bonds for the operational phase of the project”, he added. 

Investors want guarantees that the project will be implemented on time and without any significant cost overruns because there have been several instances of time delays and cost overruns. “We can discuss how to share or how to cover some of the commercial project risks with investors, but there are risks that can’t be accepted by any investor, which are the political or regulatory risks. These can only be covered by the host company and by the project provider”, the Rosatom CFO said.

In this connection, the OECD report clearly shows that nuclear technology does not need to be risky or expensive. Indeed, all the evidence gathered in the report supports not only a strong role for governments, but also a role for the nuclear sector to step up to the plate and work with governments to deliver meaningful long-term cost reduction programmes. 

According to Rebrov, another challenge is that some banks have an established policy of not working with the nuclear sector. To overcome this, Rosatom invites investors for detailed discussion of its projects only after the technical design and operational plans have been completed, licences from the host country is obtained, and the supply chain for the project is in place.

“That’s the time when we (Rosatom) understand the overall level of project risk for the investors, and we then start to work with them on the paperwork and in more detail. In most cases we don’t see nuclear projects on the agenda of banks because the projects are very complex, with lots of phases and lots of participants. We need to understand this complexity for banks and to make the whole process more transparent,” he said.

Offering another country perspective at the eForum, the Chief Engineer at China’s State Power Investment Corporation, Zheng Mingguang, said the future of nuclear power in China is promising.