· main investor project company . pwc trend – central europe/russia/middle east financing...

Financing alternatives Which have been most effective and why?

www.pwc.com

IFENC

May 2016

PwC

Government’s role

03

Agenda

Financing alternatives

2

May 2016

Other Factors

02


01

PwC

Government’s role

03


3

May 2016

Other Factors

02


01

PwC

Financing options


4

May 2016

Government funded

Corporate/ on balance

sheet

Build-own-operate (‘BOO’)

Mankala

Exceltium

Vendor financing

Government Guaranteed

7 nuclear financing

models globally

PwC

(Traditional) Nationalised Industry


5

May 2016

Government

Project company

Shareholding/ Finance

Profits

PwC

Balance Sheet/Corporate Debt


6

May 2016

Nuclear New Build Holding Company Board

Corporate debt Corporate

debt Corporate

debt

NNB Site Licensee Company

PwC

BOO(D)


7

May 2016

Host Government

Technology Government

(ECA)

Project Company Initially 100%

No less than 51%

PPA PPA

Localisation requirements Technology, fuel, other

goods and services

Financing

Site?

PwC

French Exceltium


8

May 2016

Financing Upfront payment to secure electricity

Monthly payments on contracted volumes (risk sharing)

Nuclear project

Electricity – EDF portfolio

(Government) Developer

companye.g. EDF Exceltium

Consortium of banks – non recourse senior debt plus junior debt

24 year supply agreement 148Twh baseload Price - fixed and

variable elements

Guarantors

25+ Eligible Investors –Diverse industrial sectors

Power – Own use or sell into open market

Equity

PwC

Finnish Mankala


9

May 2016

Financing mix of corporate debt, vendor loans, ECA financing, bilateral loans

Power company

Finnish industrial retail and service enterprises

Electricity

Regional and local energy companies

Main investor

Project company

PwC

Trend – Central Europe/Russia/Middle East


10

May 2016

Government

(Government) developer

ECA Debt

Owner Co Op Co

Power purchaser

EPC/FSA/LTMA

Shareholder Agreement

Shareholder Agreement

Potential (incorporated) JV Partner (s)

(Technology Provider)

Power Purchase Arrangements

PwC

Sharing risks Balancing regulatory and financing requirements


11

May 2016

Commercial ECA Parents/

Corporate lending

Debt Equity Equity

Owner Co

Offtaker Operator Co

EPC, FSA, LTSA etc.

PwC

Government’s role

03


12

May 2016

Other Factors

02


01

PwC

Risks

Long term investment and financing:

• 5 – 7 construction period

• 40 years operation

• 15 – 18 year pay back period for debt (OECD arrangement for ECA)

• Refinancing

• Risk register needs be compiled for stakeholders inc. financiers e.g.:

• Interface risks

• Technology risks/ transfer

• Delays

• Cost overruns/ variations

• Regulatory

• Decommissioning and waste policies

• Off-take


13

May 2016

PwC

Structuring (Owner/Operator) Model is evolving

Benefits in splitting

• Export credit agencies ('ECAs') and other lenders may be more comfortable lending to a company that is not a nuclear licensed company

• Third party liability strict liability of the Operator

• Allows different ownership options for different entities

Challenges in splitting

• Regulatory approval process

• Needs contract for site management and operating including funding between Owner and Operator


Traditionally, Owner and Operator roles are combined in one legal entity, the Site Licensee Company ('SLC'); however internationally, the market is moving to having 2 or more legal entities, 1) as Owner and 2) as Operator (the Operator being the SLC). All stakeholders will want to agree the structure.

14

May 2016

PwC

Capability requirements – in-house or supply chain


15

May 2016

Controlling mind and

intelligent / knowledgeable

customer

Contracting/ out-sourced capabilities

In-house core capabilities

PwC

EPCM


16

May 2016

Equity

Developer

EPCM

1

Equity ECA Other

Technical support

2 3 4 5 6 7

PwC

EPC


17

May 2016

Vendor Equity

Developer

EPC

Equity ECAs Others

PwC

Government’s role

03


18

May 2016

Other Factors

02


01

PwC

Role of Government


19

May 2016

• Policy supporting the development of nuclear power plant – cross party

• Providing a strong rule of law

• Stable environment for the development of new nuclear by the private sector

• Partial owner/developer

• Insurer of last resort including nuclear liability

• Guarantor of debt

• Guarantor of off-take agreement/offtaker

• Decommissioning and waste management solution

PwC

Government’s role

03


20

May 2016

Other Factors

02


01

Conclusion

PwC

Summary

• Bespoke solutions

• Be clear what your objectives are

• Government has a key role to play in every country

• Define structure/ procurement strategy/ framework early with stakeholders

• Drive alignment/integration of procurement and funding activities

• Early but balanced engagement with market, financiers, equity and government

• Don’t take the project too far in developing the project before engaging the market

• Create a manageable and realistic roadmap to completing the financing jigsaw!


21

May 2016

PwC

For over 20 years Fiona has been involved with projects in the nuclear industry. She remains a highly regarded specialist, particularly by industry, in the nuclear market. She is familiar with and has worked on all aspects of the nuclear cycle from new build and licensing to decommissioning, fuel storage and waste management.

She has a detailed understanding of the international regulatory framework within which the nuclear industry works and frequently advises on liability regimes and nuclear insurance, regulatory and reporting requirements, the development of regulatory regimes, feasibility studies and structuring as well as the financing, development, construction, operation and maintenance of nuclear stations and the fabrication, reprocessing and storage of nuclear fuel and waste.

She has a detailed understanding of the international regulatory framework within which the nuclear industry works and frequently advises on liability regimes and nuclear insurance, regulatory and reporting requirements, the development of regulatory regimes, feasibility studies and structuring as well as the financing, development, construction, operation and maintenance of nuclear stations and the fabrication, reprocessing and storage of nuclear fuel and waste.

She is recognised as an expert in the development and financing of nuclear projects by the International Atomic Energy Agency (IAEA) and has served as a designated expert on the financing, development and structuring of nuclear projects and on decommissioning and waste funding at special meetings of the IAEA.

She is co-author of the chapter on the resolution of disputes in the nuclear industry in “Dispute Resolution in the Energy Sector: A Practitioner’s Handbook.”

Fiona has worked on nuclear new build projects in the UK, Central Europe, Russia and the Middle East and has worked on life extension, decommissioning and fuel management project.

Fiona Reilly PwC | Capital Projects and Infrastructure – Global nuclear lead

22

PwC

Understanding of the nuclear market


23

May 2016

We advise on nuclear new-build, operational nuclear issues and on decommissioning and waste management

We understand policy, regulatory and financing issues associated with the nuclear sector and why certain solutions are not universally applicable.

We know participants and stakeholders across the globe

We understand the risks faced by participants in different countries and different parts of the value chain

Mining

Conversion

Enrichment

Fabrication

Reactor construction

Power generation

Decommissioning

Storage

Reprocessing

Vitrification

Disposal

PwC

Experienced in the global nuclear market


24

May 2016

The financing of new build projects (including the use of export credit agency and multilateral borrowing sources)

Structuring projects to achieve an optimal finance solution

PPA and CfDs, and other regulatory and revenue models

Government support mechanisms, including guarantees

Regulatory compliance advice

Decommissioning funding assessments and review

Contracting and procurement support

Organisation development

Project construction and operational support

Governance and operating model design

Risk analysis and management

Joint venture and alliance design and stand-up

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· main investor project company . pwc trend – central europe/russia/middle east financing...

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