NUCLEAR:The challenges for

investmentStephen Tromans QC

The Global Picture: reactors under construction

Source: IAEA Power Reactor Information System - 2013

Under Construction Reactors

                                                                                                                                                                                                                                  

              

Operational reactors by age

• Source: IAEA Power Reactor Information System - 2013

Operational Reactors by Age

The challenges

• Construction risk – huge and complex projects

• Economic uncertainty as to future energy prices

• Safety – ever more exacting standards in a post-Fukushima environment

• Political risk – anti-nuclear sentiment, e.g. Germany

• Liabilities – both for accidents and for long term management of wastes

The financing environment

• Shift from model of government owned and sponsored projects to private finance

• First of a kind technology• No consistent financial model• Constraints on financing by World Bank,

IFC• Requirements of vendor financing• Importance of de-risking the project

Olkiluoto-3• Construction began August 2005, projected online

by end 2018• World’s largest nuclear arbitration – currently

€3.4bn by contractor consortium and €2.3bn by utility

Economic de-risking

• The UK arrangements with EDF on strike price

• Commission concluded measures with modifications were compatible with EU State Aid rules (October 2014)

• Decision subject to challenge by Austria and by German co-operative founded by Greenpeace

• Implications for final investment decision

Hinkley C

EDF visualisation

Safety• Consequences of Fukushima• Disruption of programmes• Stress testing of existing reactors• Greater focus on safety in new build

Liability

• Fukushima predicted costs now $105bn

• Includes $47bn compensation to affected residents

• $23bn clean-up costs• Ruling for payment of

$472,000 to widower whose wife committed suicide

Nuclear plants and earthquake activity

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