Experience feedback from recent Nuclear New Build Projects How to manage the risks?

Transcription

1 Experience feedback from recent Nuclear New Build Projects How to manage the risks? São Paulo, Yves Crommelynck Senior Vice President Projects Nuclear Development Division

2 Agenda ENGIE and its nuclear projects Nuclear New Build framework Risk allocation and mitigation Key issues in Brazil & Conclusions 2

3 ENGIE : Key figures and its balanced electricity generation and geographic mix 74,7 billion in 2014 revenues 152,900 employees gigawatts of installed power capacity 10.5 gigawatts under construction Breakdown by energy source 6-7 billion of net investment per year over Operations in 70 countries 900 researchers and experts at 11 R&D centers North America Rev.: 3.8bn 4,100 emp GW 0.1 GW Latin America Rev.: 4.3bn 5,450 emp GW 3.2 GW Europe 1 Rev.: 58.7bn 136,600 emp GW 0.4 GW Africa Rev.: 0,4bn 150 emp. 0,3 GW 2.5 GW Middle East Rev.: 0.5bn 1,250 emp. 25 GW 3.6 GW Asia Rev.: 5.4bn 2,550 emp. 9.6 GW 0.7 GW Pacific Rev.: 1.5bn 2,800 emp. 3.9 GW * Including 100% of capacity of assets held by the Group at December 31, 2014, regardless of the actual holding rate. (1) Inc. Turkey. 3

4 Brazil : Diversified portfolio of generation assets, with strategic locations Net Installed capacity of 7,044.3 MW from 28 plants operated by Tractebel Energia: 79% hydro, 16% thermal and 5% NCRE. This capacity stands for 89% increase since Doel 4

5 50 years of expertise in nuclear energy Stakeholder in Europe first commercial PWRs BR 3 ( ) & Chooz A ( ) Operator of 7 reactors in Belgium 3 at Tihange and 4 at Doel The Group capacities in Belgium, France and Germany MW Strength : independent from vendors Participations in Georges Besse II (uranium enrichment plant) Tihange ENGIE nuclear vision and strategy CONSOLIDATE Value creation of existing nuclear assets Expand added value of NUCLEAR SERVICES DEVELOP New nuclear capacity Doel 5

6 United Kingdom: a very specific environment The Government objective is to achieve secure, low carbon and affordable electricity... and to have 16 GW of new nuclear capacity operating by 2030 To facilitate nuclear new build, implementation by the Government of several measures Streamlining the planning process Carrying out strategic siting assessment Putting in place the Electricity Market Reform Legislating to ensure decommissioning and waste management liabilities will be met The first new-generation plants expected to be on line by Involvement of a reactor vendor in each of three major projects in new nuclear build (EDF Energy, Horizon and NuGen) 6

7 The nuclear project of ENGIE in the UK On June 30, 2014, Toshiba (60%) and ENGIE (40%) complete NuGen deal, Europe s largest new nuclear development The first of three Westinghouse AP1000 reactors is targeted to for operation in , with full commercial operation of 3.6 GW targeted to be achieved by 2030 NuGen s Moorside NPP to provide nearly 7 % of U.K. s electricity requirements and expected to create between 14,000 and 21,000 UK jobs The deal will boost development of the Moorside nuclear project on land to the north and west of the Sellafield site in West Cumbria A deal has been concluded with the NDA on the extension of a land option agreement for the Moorside site Development goes on with the recruitment of leading nuclear professionals, the characterisation of the site, the development of the nuclear site license the start of negotiations with HMG on market and financing framework Tractebel Engineering is acting as Owner s Engineer 7

8 Turkey: an environment with newcomer challenges The Government objective is meeting the increase in electricity demand and to ensure energy independence through secure, baseload, low carbon and affordable electricity... and to have about 9 GW of nuclear capacity operating before 2030 To facilitate new nuclear build, implementation by the Government of several measures Deploying Inter Governmental Agreement umbrella Allowing long term Power Purchase Agreement Willing to develop nuclear culture and a legal, regulatory and industrial framework : regulatory bodies, localization, educational system,... with Institutional support by partner countries The first new-generation units expected to be on line by 2023 Involvement of a reactor vendor in each of two nuclear new build projects (Akkuyu and Sinop) 8

9 SINOP: the ENGIE nuclear project in Turkey May 2013 : Turkey signs the 2nd Inter Governmental Agreement (IGA) with Japan for the construction and operation of 4 ATMEA1 units and a Host Government Agreement between the Government of Turkey and the Project Sponsors was agreed upon IGA and HGA have been ratified by the Turkish parliament on April 1, 2015 and July 31st is the formal starting date of a month Feasibility Study period. It includes a thorough assessment of the pre-conditions from a siting, technical, financial, economic, business, legal and regulatory perspective A strong and sustainable Partnership in developing the Project is created between local and international Utilities, developers and a vendor Main challenges are Capacity building in a newcomer country nuclear environment Difficult site conditions FoaK ATMEA1 technology Non recourse Project Finance Tractebel Engineering is acting as Owner s Engineer for the Technical feasibility 9

10 Agenda ENGIE and its nuclear projects Nuclear New Build framework Risk allocation and mitigation Key issues in Brazil & Conclusions 10

11 Why are nuclear projects different? Large scale, duration and limited number of projects, especially in Western countries High fixed and low variable costs High capacity & availability Long term management of fuel & radioactive waste up to decommissioning Industrial relations with few suppliers of NI and CI Nuclear safety (international standards & regulation) with long licensing and permitting process Global nature of nuclear risk Experience feedback with limited business cases available Lack of nuclear development skills and need for long term management of expertise in all domains Transparency and communication, Fukushima trauma Consequence High Development costs & need to apply a staged gate de-risking approach 11

12 Nuclear New Build projects have changed Past Majority government owned/sponsored nuclear industry Financed through State funds or strong private balance sheets, with State support in terms of risk allocation and legal framework Electricity market : strong and stable regulated environment (cost+) Mostly in developed countries with stable political climate and legal framework Pre-Fukushima environment Proven technologies National industry In-country human resources Inspired by Today & tomorrow Privately owned/sponsored (with short/medium term profitability focus) and requiring strong government support Short investment tenor, financial crisis : new financing models and sources sought Electricity market: volatility of fossil fuel power prices, deregulated or differently regulated and unbundled Developing countries newcomers in nuclear Post-Fukushima environment: risk profile affected & nuclear industry reputation issue First Of A Kind technologies Increasingly international industry and JVs Global human resources challenges and requirements and significant operational support, particularly for emerging nuclear countries 12

13 Typical investment criteria Coherence with Group Strategy Workable partnerships Stable long term political commitment Clear and predictable long term legal and regulatory environment A suitable electricity market and revenue guarantee arrangement Site assessment (incl. a reliable High Voltage grid) Technology assessment Local acceptance (see afternoon presentation) Industrial framework and possibility to build local (nuclear) competences Fuel cycle and radwaste management solutions Economics, Financing & Off-take 13

14 Agenda ENGIE and its nuclear projects Nuclear New Build framework Risk allocation and mitigation Key issues in Brazil & Conclusions 14

15 Managing the Partnership risk Focus on large, complex projects to create value in Development & Operation Co-Owner & Co-Operator for highest safety level PWR technology Through sustainable partnerships to share risks, costs, benefits to decrease competition and reduce costs to meet clients requests/demands with adequate industrial scheme coping with local situation at equity level : Utilities and/or giant Consumers at political level : local incumbent Utilities at contractual level : Suppliers / Contractors Work on challenging sustainability of the partnerships 15

16 Managing the Partnership & Technology risk Including Siting and delivery contractual scheme Manage Vendor / Investor potential conflict of interest Through Plant delivery contractual schemes with affordable risks Avoid late changes in design Prepare and manage the EPC contract Avoid cost overruns and delays Make sure the site is appropriate Make sure that the insurance market is available at affordable cost EPC Consortium to develop the appropriate supply chain with qualified and available resources / materials 16

17 Addressing the Political risk and working on Public awareness & acceptance Getting stable long term political commitment could remain out-of-control Need to assess and understand Macro / Micro Political Risk Environment Cover the change in law to avoid endangering the economic equilibrium Prepare to Legal challenges Termination of the Project by Sovereign decision to stop the country Nuclear Program needs to be properly covered including in terms of funding the early decommissioning. Project Company to fulfill its contractual obligations. Reputational risk is key Work on Public awareness & acceptance by meeting public expectations and engaging with national and local stakeholders, promoting nuclear energy as an acceptable and legitimate way of meeting energy needs, building up Project Company image as a legitimate stakeholder in nuclear energy 17 17

18 Finding a way in the legal and regulatory environment NNB projects need a consistent and predictable application of mature regulations on nuclear safety and liabilities, both national and international : key challenge in newcomer countries and/or in case of adaptation of existing regulations Delay in licensing & permitting process is a key risk In terms of allocation, governments and regulators have the responsibility to define the National Energy Policies and sign the International Conventions put a stable and consistent legal framework in place, National Acts and Laws Project Company to fulfil all regulatory obligations in order to be able to be recognized as Owner through the implementation of the Owner/Operator organization in line with Safety & Environment Authorities requirements develop the Licensing process and schedule 18

19 Mitigating the competences challenge Need to recruit, train and retain workforce for the design, construction and the operation phases mobilize skilled people and skilled suppliers develop local manpower competency create partnerships with research centers and Universities foster bilateral support agreements Look ahead staffing plan with timeline to facilitate local and secondees recruitment, fully respectful of local labor law requirements 19

20 Lender s view on investment & Financing principles Extensive risk mitigation and allocation is necessary with a need for more commitments from both Government and Sponsors Stability and predictability through an efficient and effective regulatory system is key as arrangements for the management of radwaste, spent fuel and decommissioning Sufficient nuclear insurance cover needs to be available Long term Power Purchase contracts with strong off-taker(s) are necessary Lenders are not (yet) comfortable with key risks associated with nuclear ECAs State Banks Commercial Banks Regional partners International partners Debt Equity Project Company Commercial banks need strong security package State Banks and ECAs will demand extensive due diligence Bridge financing needed between the EPC NTP and the FC of the long term financing shall be fully covered by Local Government with reimbursement by Sponsors at FC. 20

21 What kind of market support mechanism? PPA or revenue guarantee mechanism is mandatory for both Lenders and Sponsors It shall include, depending on the detailed risk allocation, minimum duration to allow adequate return for the Sponsors and to attract long term financing, which is key for achieving a viable cost of generated electricity guaranteed output / take-or-pay, i.e. fixed volume assumptions... pass through of some key costs (fuel costs, insurance for example) delay LD s / performance guarantee to be back-stopped by the EPC contractor final cost of radwaste disposal and decommissioning risk borne by Government with a fixed and pre-agreed contribution by Sponsors through adequate funds well defined Licensing schedule with any delay not due to Sponsors passed-through in the PPA Therefore, flexibility and willingness of all parties to adapt the tariff/price to cope with the project uncertainties will be necessary to guarantee final project viability 21

22 Agenda ENGIE and its nuclear projects Nuclear New Build framework Risk allocation and mitigation Key issues in Brazil & Conclusions 22

23 Brief assessment of nuclear new build in Brazil Brazil is active all along the nuclear value chain: producer of Uranium, covering the frontend of the fuel cycle, R & D Centers, a prototype PWR for naval propulsion under construction, a heavy components factory, two running nuclear power units, a third one under construction Future contribution of nuclear to the energy mix remains unclear but National Energy Plan 2030 (PNE) indicates the need of new nuclear plants. The capacity gap of the Brazilian system is around 7.5 GW per year according to the last ten year plan released (PDE ) Regulated market : 40 to 50 years PPAs could be envisaged for nuclear and the auction process will probably need some adaptation Local manpower is technically competent to the level required for nuclear power construction, operation and supply. However continuous capacity building is needed and Grid can absorb large power, although reinforcement is likely to be required in some locations Low seismic risk but non-negligible flood risk near big cities Present regulatory conditions need to improve and a new business model shall be implemented before launching new projects Private or semi-private ownership for new nuclear power remains an issue and a strong political support is needed, as a change in the Brazilian Constitution may be required _INAC_GDF SUEZ NNB investment 23

24 Conclusions ENGIE is willing to develop nuclear as a co-owner and co-operator of highest safety level PWRs Based on international IPP developer experience Respecting the profitability expected criteria given the risks Within environments that are sufficiently regulated and/or formalized via contracts By sharing the risks, costs and benefits with partners Establishing a clear governance from the beginning of the project to become an intelligent operator in the country Selecting the technology and the right delivery contractual schemes based on on-going nuclear new build projects using highest safety level PWR types (e.g. ATMEA1 or AP1000) ENGIE believes that Brazil will take advantage of the long term experience of international investors-operators with strong local presence and nuclear expertise, like ENGIE, in setting up partnerships and bankable development schemes 24