New Nuclear in Our Lifetimes? In the US. Is It a Dream?

Transcription

1 New Nuclear in Our Lifetimes? In the US Is It a Dream? Or 1

2 Is It a Real Train? That Has Already Left the Station?

3 US - Broad Geographical Spread, With 27 Corporations US W/CE 62 GE 34 B&W 7 Western Europe AREVA 81 W/ABB 25 GE 4 Western European Owners, Tight Geography With 18 Corporations 3

4 US average age = 26.2 years (+ 8 years construction delay) Nuclear Plant Age No. of Plants Year on-line Refurbishment actions RV heads. Internals, IHAs RSGs and primary piping I&C Relicensing, power uprates NDE, weld repair EDF average age = 20.9 years US units are in a major refurbishment cycle to support license extension # of Plants 4

5 The Energy Highway > U. S. is facing dramatic challenges in energy supply Volatile fuel costs Coal prices increased 57% in two years Demand for natural gas expected to double in three years Rising electricity prices Electricity demand 3.3% last year higher than forecast Rate shocks in 10 states this year Seven regions need to build new generation Texas experienced a brownout this past summer Increasing environmental obligations Personnel resource shortages Energy Will Be a Key Issue in the 2007 Political Campaign Circus 5

6 Market Drivers: Fuel Prices Rising Coal Prices - Average Weekly Coal Commodity Prices 6

7 Market Drivers: Fuel Prices Market Faces High and Volatile Natural Gas Prices Hurricanes 7

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9 Double-digit Residential Electricity Rate Increases From 10% - 72% in 10 states ILLINOIS Some estimate 35% increases in 2007 if auction model is adopted; utility proposals include single-digit annual increases followed by deferred cost recovery ARIZONA Regulators In November 2005, Arizona Public requested Service asked 20% regulators to approve 20% rate increases Rate Caps Disappearing If auction adopted, increase could be 35% MARYLAND February auctions indicated Increases residential prices range would rise 39% from for 35% Pepco, to 35% 72% for DP&L, and 72% for BG&E; recent stakeholder discussions are proposing phase-ins of 15 25% increases per year before a full move to market-based rates MASSACHUSETTS NSTAR and National Grid customers 25-35% saw 25 35% rate increases on 1/1/06 increase 1/06 CONNECTICUT Regulators approved 22% 22% increase increase for CL&P effective 1/1/06 1/06 FLORIDA Rates rise 19% for 19% FP&L for and 12% FPL, for Tampa 12% Electric and Progress othersflorida MAINE 10% increase Central Maine Power rates increased 10% 3/1/06 effective 3/1/06 RHODE ISLAND Narragansett Electric rates rose 13% on 1/1/06 13% increase 1/06 DELAWARE Rate increases will be phased with a 15% increases increase effective May 2006, 15% a 25% - 5/06, increase January 25% , 1/07and a 19% increase effective 19% June - 6/ DISTRICT OF COLUMBIA Pepco expects bills 12% to IN rise 12% in June /06 Phased Virginia is Still Under a Rate Cap Until

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11 The U.S. And More Specifically Certain Regions Have a Growing Need for New Generation MAAP WECC NPCC PJM VACAR FRCC ERCOT Customers Operating in Regions Where the Minimum Reserve Margin Will be Reached Have Greatest Need for EPR Date when minimum reserve margin of 18% is reached 11

12 2007 Potential Nuclear Plant Daily Revenue $2.04M $1.72M Typical 1000 MW Plant ($321K) Production Cost at $13.38/MW-hr Revenue/day at $85/MW-hr Margin 12

13 29 Nuclear Generation Units Have Been Sold 31 Duane Arnold Kewaunee Palisades Clinton Nine Mile Point Bruce Ginna Beaver Valley Vermont Yankee FitzPatrick Seabrook Pilgrim Millstone Indian Point 2 Indian Point 3 Oyster Creek TMI Palo Verde South Texas Project 13

14 Valuations Have Become Extremely Healthy Nuclear transaction multiples ($/kw) JPMorgan advised Determinants of value TMI-1 (NJ) 127 Pilgrim (MA) % Seabrook (NH) 95 Clinton (IL) 21 NA Oyster Creek (NJ) 16 Peach Bottom (PA) 67 Salem/Hope Creek (NJ) 111 Beaver Valley (PA) IP-3, FitzPatrick (NY) 16% Palo Verde (AZ) Millstone 2 (CT) Millstone 3 (CT) IP-2 (NY) NMP-1 (NY) NMP-2 (NY) Vermont Yankee (VT) 88.2% Seabrook (NH) % in AmerGen 207 Kewaunee (WI) 404 Ginna (NY) 862 Source: Company information; RDI; JPMorgan 25.2% STP (TX) 528 Duane Arnold (IA) 716 Increasing role of nuclear generation in corporate strategies Developing buyer views on nuclear risks vs alternative generation types Perceived lack of supply in nuclear M&A market Existence of PPAs and/or bullish views on merchant baseload Buyer views on operational skill sets Experienced views on synergies Transfer of expertise Reduction in cost of capital 21 14

15 Stock Trends for Companies Announcing New Reactors Company Stock Price Just Before Announcement Stock Price At The End of Trading, September 5 Change Constellation $53.85, (10/26/05) $ Duke $27.45 (2/15/05) $ Entergy $72.25 (9/21/05) $ FPL $4.14 (3/31/06) $ NRG Energy $47.13 (6/20/06) $ Pinnacle West $40.12 (5/17/06) $ Progress $43.06 (8/26/05) $ SCANA $41.73 (8/23/05) $ Southern $33.04 (5/11/05) $ TXU $65.00 (8/30/06) $

16 Energy Bill Effects are Very Positive $/MWhr Without EPACT With PTC W/Loan Guar. Only W/Full EPACT New Coal Plant 16

17 Patrick Moore Green Peace Steve Brand Whole Earth Catalogue James Lovelace GAIA Greg Warren Australian Wildlife Fund 17

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20 A Number of Utilities Are Moving to Create a New Nuclear Option COL Issued COL Hearings Year License To Build COL Submit & NRC Review COL Prep Site Selection US EPR AP1000 ESBWR ABWR CEG #1 Duke Entergy NRG CEG #2 Progress Dominion Dominion CEG #3 SCE&G Ameren TVA Southern 20

21 New Nuclear Units Will be Ordered on Phased Basis AREVA Product is certified design for all U.S. EPRs in fleet Combined Construction and Operating License COL T=0: 2005 T=6: 2011 Product is asset License to build a U.S. EPR at a specific site (good for 40 years) Long-lead Materials T=1: 2006 LLM Product is a steel forging Secondary market exists for resale (ASME/RCMM conversion) T=1: 2006 Early Site Activities T=5: 2010 Optimizes construction schedule and allows for acceleration, if market conditions change Commit to Construct Construction T=5: 2010 T=10: 2015 Early Decisions Build Options for Future Options Have Significant Value U.S. EPR Operational 21

22 Design Certification Importance ABWR 1997 ESBWR DC 2005 Filed Target Date GE ESBWR 1/2010 (est.) AP AP AP Amendment Filing W AP1000? EPR New License Rules: US EPR DC Submittal 2007 US EPR 10/2010 (est.) > All issues addressed and approved by NRC > Are not subject to open hearings Seismic, EQ, single failure, etc. 22

23 New Business Model Emerges to Respond to Capacity Demand - as UniStar CEG Standard Plant AREVA Standard Plant EPR EPR Offering Offering CEG CEG Part Part Owner Owner / / Operator Operator CONTRACT #1 PO EPR (AREVA) PO EPR (AREVA) BECHTEL Marketing Activity Owners Owners CEG / Utility #1 CEG / Utility #1 PO CEG Operator CONTRACT #2 Owners Owners CEG / Utility #2 CEG / Utility #2 CONTRACT #3 PO BECHTEL STG Vendor PO EPR (AREVA) PO EPR (AREVA) PO BECHTEL STG Vendor PO EPR (AREVA) PO EPR (AREVA) Power Purchase Power Purchase Agreement Agreement (Utility #3) (Utility #3) Power Purchase Power Purchase Agreement Agreement (Utility #3) (Utility #3) Owner Owner CEG CEG CONTRACT #4 Owner Owner CEG CEG PO BECHTEL STG Vendor PO EPR (AREVA) PO EPR (AREVA) PO BECHTEL STG Vendor 23

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25 New Nuclear in Our Lifetimes? YES! In the US? YES! Is It a Dream? NO! 25

26 Is It a Real Train? YES! That Has Already Left the Station? YES!

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