Nuclear power plant financing

The World Bank grants financing for fossil fuel electricity generation, yet finances only facilities that have advanced emission control equipment. And although the World Bank has never financed a nuclear power plant, a zero carbon emitter, it is vciy active in evaluating hydropower projects, helping to establish the World Commission on Large Dams. 

The first large-scale privately-financed nuclear power plant is being built by Consolidated Edison Company of New York. It is also the first thorium power plant in the world. The site of this 55,000,000 station, with a capacity of 200,000 kilowatts, is Indian Point, New York, on the Hudson River about 40 mil s north of New York City. This water-moderated breeder type of nuclear system will supply electricity to about one million New Yorkers starting in 1960. 

The reverse would be that insurance and other financial institutions would require demonstration of higher safety performance as a prerequisite for financing or underwriting risks. For example, in order to operate, nuclear power plants in the United States must demonstrate sufficient financial assurance to satisfy liability claims of members of the public for personal injury and property damage in the event of a catastrophic nuclear accident. Such insurance is available through the American Nuclear Insurers, which evaluates plant performance against objectives, criteria, and guidelines developed in conjunction with the U.S. NRC and the Institute of Nuclear Power Operations. A plant must receive a favorable report from this review before it can be insured. 

The early history of atomic weapons and fallout left a residue of fear and distrust of nuclear technologies. The so-called anti-nuke movement developed from this residue. Civilian nuclear power plants use a controlled nuclear fission reaction to boil water to turn a steam turbine to make electricity. The corporate sector was initially reluctant to finance nuclear power plants when President Eisenhower praised them in 1953. However after Congress enacted the Price-Anderson Act in 1957, to limit corporate liability in case of mishap, development of the technology proceeded apace. The first nuclear power plant built without direct government funding went on-line in late 1959. 

Nuclear power has, in spite of some accounts to the contrary, maintained its position as a safe, economic and reliable source of electric energy. In 1984 alone, 33 new nulcear power plants went into operation, the total today being 344. Nuclear power plants now account for about 12% of all the electricity generated. Ten Member States of the IAEA produced more than 20% of their electricity by nuclear power in 1984, with France and Belgium producing even more than 50%. There were set-backs in recent years, however, caused mainly by lower than expected increase in demand for electricity, by political and public-attitude constraints, by very long construction times in some countries and by financing problems. 20 plants planned or already under construction were cancelled or construction suspended in 1984, mainly in the USA. 

Because of the sheer magnitude of the capital needed and the time over which it is needed, the financing of a nuclear power plant project poses particular problems wherever it is to be constructed. Even a power plant in the 300 MW(e) range would require a total capital investment of some US 800 millions for a standardized plant in a serie including interest during construction the period of repayment would be some 15-20 years after the year of commissioning of the plant. These are conditions which go beyond normal export credits. 

A parallel is often drawn between big hydro-power and nuclear projects, as the former may well be more capital intensive and take longer to build. There is, however, a fundamental difference as far as export credits are concerned, as the civil works for hydro projects are most often financed domestically, and the foreign component of equipment is only delivered in the last years of the construction, making the repa3mient period shorter than for a nuclear power plant. 

The cost information received from three potential SMPR suppliers indicate that capital costs for a 300 MW(e) nuclear power plant would not be more than 50-70% higher than for a coai-fired power plant of the same size. The financing institutions do, however, have more experience of coal-fired plants and tend to consider them as projects which are more easily controllable and having a smaller risk. Nuclear plants are still perceived as riskier, and not unjustifiably, in view of some notable cases of major schedule and cost overruns in both industrialized and developing countries. Two factors which should favour an SMPR project should thus be the overall smaller package that is to be financed (in comparison with a 600 MW(e) or larger unit) and the shorter and tightly controlled construction schedules cited by several suppliers. 

It is, however, to be noted that the World Bank never has been asked to participate in the financing of a nuclear power plant in a developing country. 

The evaluation of a nuclear power plant project in a developing country will certainly include the project-specific considerations of economic viabiltiy, debt servicing capacity and project soundness, both the pre-operational and operational aspects, and will draw also on experience from other projects in the country. Still, according to the national export financing institutions, the creditworthiness of the country will be a primary consideration and involves such aspects as ... 

Liability insurance is compulsory in the Netherlands only for motorists, nuclear power plants, oil tankers, medical research involving human subjects (not only businesses but also universities and other research institutions) and hunters. Businesses do take out liability insurance for other reasons, for example because they are required to do so under a permit or because the bank financing them demands it. It is conceivable that a business may want more substantial liability coverage after appraising its risks, but that the statutory obligation acts as a perverse incentive, causing it to insure itself only for the minimum amount. 

The customer could purchase a commodity nuclear power plant, already license certified, and he would bring it on-line with a very short on-site installation and checkout period so as to start a revenue stream shortly after taking on his financing loans and equity. In this way, the licensing uncertainty would be eliminated and the interest during construction could be reduced. 

The data in Table 24.4 is sparse in detail compared to the table of the plant that went operational in 1984 (see Table 24.3). The reason for this dramatic difference comes from the competition now faced in the nuclear industry, as vendors and buyers keep almost all capital-cost data proprietary. The only data that are available are what are mandated to be released to the shareholders of these companies. These data only list total cost and overruns. The interesting part about the information in Table 24.4 is the number that is associated with the financing cost. It is a significant part of the total investment of the power plant. 

A typical large electric power plant (whether fossil or nuclear) is built by a variety of these financing methods. 

Work out institutional arrangements for financing ENHS power plants for developing countries, for the ownership of the fuel and for the disposition of the nuclear waste. 

A report financed by Public Citizen, a group critical of nuclear power, lists dozens of instances of nuclear plant O ring failures from 1975. For example, faulty O rings at the LaSalle nuclear plant in Seneca, lU., were blamed for the failure of an automatic shutdown system and an emergency cooling system, the report said. 

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