Financing Perspective for Jordan Nuclear Power Plant London, May 09, 2012 1
Agenda Jordan s Nuclear Power Programme Financing Challenges Financing Options Delivering a Financeable Project Way Forward 2
Jordan Country Profile - Total Area: 89 213 sq. Km - Sea Port: Aqaba - Coastline: 26 Km - Population: 5.96 million 31% (15-29) 38% (below 15) - Climate: Mediterranean & Arid Desert - GDP: $21.5 billion - Per Capita: $3,554 - Annual GDP Growth: 7% (2000-2009)
Jordan s Nuclear Power Programme Why Nuclear Power? Growing demand for energy electricity desalination Need for Baseload power Diversification away from hydrocarbons high and volatile prices greater energy independence/security of supply Lack of indigenous fuel options 4.
Energy Mix - 2009
Electricity Generated by Fuel Type 7% 3% 4% 1% 3% 24% 11% 32% 89% 69% 32% 25% 2009 2010 2011 NG HFO LFO Imported Electricity
MW Available and Committed Capacities versus the Electricity Median Load Forecast 2009 0 2010 0 2011 0 2012 0 2013 0 2014 561 2015 821 2016 1200 2017 1539 2018 1832 2019 2100 2020 2670 2021 3045 2022 3634 2023 3974 2024 4336 2025 4721 2026 5095 2027 5490 2028 5908 2029 6352 2030 6839 2031 7740 2032 8579 2033 9151 2034 10138 2035 10783 2036 11754 2037 12846 2038 14022 2039 14824 2040 15676 18000 16000 14000 12000 10000 8000 6000 4000 2000 0 Existing & Committed Capacity Capacity Shortage Peak Load
Status of Implementing Nuclear Power in Jordan Established key bodies: Nuclear Regulator JNRC Nuclear Procurement Agency - JAEC Building the Infrastructure Sites Laws and regulations Education International Collaboration IAEA, Peer Groups, Collaboration Agreements Technology Selection Detailed process using IAEA methodology and supported by experienced advisors Shortlisted two technologies for final negotiations Identification of operator/investor partner 8
Financing Challenges for Nuclear Power in General Capital intensity and long pay-back period Risk of construction delays and cost increase potential for stranded investments Market risk requires stable power offtake arrangements Nuclear liabilities spent fuel, decommissioning Political and regulatory risks e.g. Germany s exit from nuclear Accidents Fukushima-type events affect the whole industry Lack of experience in financing nuclear and condition of the capital markets 9
Financing Challenges for Jordan in Particular Scale of the investment relative to Jordan s GDP Limited Government financing available not like many other Arab Countries Jordan s credit rating and IMF restrictions are hurdles for financing and ability to provide sovereign guarantees (which are likely to be required) First nuclear power plant no track record of construction or operation Regional issues 10
Financing Options Option Characteristics Applicability to Jordan Project finance Limited or non-recourse financing Very few, if any examples, worldwide extremely difficult for new entrant such as Jordan Private sector utility financing e.g. EDF (UK), Southern Company (USA) Large utility finances project all or largely on-balance sheet Level of pricing certainty/support may be required or cost recovery via regulated customer base Currently, no private sector utilities in Jordan Intention is to establish a nuclear utility owned by Jordan and strategic partner(s) Federal/State financed e.g. China, Russia State-owned utility Scale of financing required beyond Jordan s capability Finnish Exeltium model e.g. Olkiluoto Vendor/Sovereign financing e.g. Turkey Plant built to serve consortia of large power users. (paper mills, aluminium smelter) Plant itself is not for profit Government of the vendor finances (all or part), builds and operates plant Power required for non-industrial consumers industrial users not of sufficient scale Attractive to Jordan as long as Jordan participates in project 11
Financing Sources for Jordan Jordan Equity Vendor or Sovereig n Equity Commercial Banks NPP Strategic Investor s Islamic Banks Export Credit Agency 12
Delivering a Financeable Project Infrastructure Development Following IAEA guidelines Modern reactor technology - evaluating Gen III+ technologies incorporating latest safety systems Thorough site selection and licensing process Developing legal and regulatory framework Working with the international nuclear community Developing nuclear capabilities in Jordan Identifying an experienced international nuclear strategic partner 13
Delivering a Financeable Project Project Structure Schedule risk - two project phases: Early Works Phase develop project definition and reduce project risk Project realization phase for which financing/investment solutions will be investigated Construction risk - EPC contract with major vendor Political risk - direct Jordanian government investment in the project Fuel risk - secure fuel supply agreement Market risk - Long term power purchase agreement Operating risk - Strong international operator Nuclear risk international treaties, decommissioning and spent nuclear fuel policy 14
Potential Project Structure Government of Jordan Guarantee Electricity Off Taker Guarantee Guarantee Private equity investors Project Company Lenders EPC Contractor Nuclear Island Conventional Island Civil Works BOP 15
Next Steps for Jordan NPP Strategic Partner Identify Partner Establish Utility Technology Select technology vendor Licensing Infrastructure Site characterisation Infrastructure development Project Early Works Agreement EPC Contract Financing Feasibility study Engagement with financial community 16