Nuclear New Build: Risk and Finance

Transcription

1 Nuclear New Build: Risk and Finance George Borovas May 2016

2 Contents Shearman & Sterling s Global Nuclear Group 3 A Changing Industry 4 Nuclear Project Risks from Lenders Perspectives 5 Nuclear Finance in What Should be (but not always is) the Easy Part: De-risking Your Projects 7 Bringing in Other Investors 9 View of Risk 10 2 Nuclear New Build: Risk and Finance May 2016

3 Shearman & Sterling s Global Nuclear Group Dedicated nuclear energy lawyers Nuclear projects, finance & development group Developed many IPP models under US and English law 140 year history advising financial institutions FOAK nuclear projects and transactions around the world Advising lenders on developing their policy and investing into nuclear projects Nuclear disputes Advising on the world s largest nuclear arbitration Focus on delivering practical, bankable and deal-making solutions for our nuclear industry clients based on experience and lessons-learned 3 Nuclear New Build: Risk and Finance May 2016

4 A Changing Industry Past Today & Future Majority government owned/sponsored nuclear industry Pre-Fukushima environment Proven (but older generation) technologies Government financed Privately owned/sponsored Post-Fukushima risk environment FOAK technologies (today) but soon proven (and safer/more efficient) technologies New sources of finance sought limited current availability (focus on ECA and vendor finance) 4 Nuclear New Build: Risk and Finance May 2016

5 Nuclear Project Risks from Lenders Perspectives Financial risk primarily driven by: Reputational risk primarily driven by: Historical/current experience of project delay and cost overruns Long-term regulatory and power market uncertainty Need for long-term human resources development Significant amount of finance and long development/construction periods Nuclear liability Social perceptions associated with nuclear Political risk and public acceptance issues Post-Fukushima environment and nuclear safety concerns Nuclear non-proliferation Radioactive waste management/disposal AND Historical/current experience of project delay and cost overruns 5 Nuclear New Build: Risk and Finance May 2016

6 Nuclear Finance in 2016 No precedent or standard model Government support structures are evolving Developing models for distribution of risks to attract other investors Nuclear Finance in 2016 Solutions sought anchored around ECA and vendor finance. but that is not enough No multilateral support..but AIIB/NDB may set precedent 6 Nuclear New Build: Risk and Finance May 2016

7 What Should be (but not always is) the Easy Part: De-risking Your Projects Safety Demonstrable safety culture in absence, regulators will delay projects Design Complete detailed design, recently constructed reference plant using proven supply chain and construction team Vendor management Integrated project delivery team with key personnel experience in building nuclear power projects and experienced sub-contractor networks Owner management Owner experience in managing large construction projects Project management Sound project management is best way to minimize risk. Vendor implemented with hands off leadership by owner (as stated by one of the most experienced project managers I know) Owner-vendor partnership and teamwork A good contract should be your guide, not a manual for filing claims 7 Nuclear New Build: Risk and Finance May 2016

8 What Should be (but not always is) the Easy Part: De-risking Your Projects (continued) Regulatory process and interface Clear and established interface mechanisms with the regulator; capacity and capability of regulator; cooperation between regulatory authorities; country of origin licensing Host government and export government supporting structures Bilateral nuclear cooperation on export controls, nuclear liability, industry participation and human resource development Human resource development Long-lead item 8 Nuclear New Build: Risk and Finance May 2016

9 Bringing in Other Investors Engage with investors at the early stage of project development Understand and explain risks Demystify Speak in plain terms Apply practical perspective on likelihood and potential impact Developing solutions Lessons learned Explain what you will do differently to avoid past challenges Detailed risk identification/allocation/mitigation 9 Nuclear New Build: Risk and Finance May 2016

10 View of Risk Sponsors Suppliers Lenders NPP Project Government Vendors Public 10 Nuclear New Build: Risk and Finance May 2016

11 Shearman & Sterling has a full-scope Global Nuclear Group. Working with the firm s world-leading Project Development & Finance Group, with experience under English and US law, we focus on procurement, construction and financing for nuclear new build, and offer nuclear industry advice on international nuclear law, nuclear liability and nuclear trade issues. We advise on first-of-a-kind projects and transactions and have devised practical, bankable and deal-making solutions. Our Global Nuclear Group is headed by partner George Borovas, who has 20 years of experience advising the nuclear industry and is based in Tokyo. ABU DHABI BEIJING BRUSSELS DUBAI FRANKFURT HONG KONG LONDON MENLO PARK MILAN NEW YORK PARIS ROME SAN FRANCISCO SÃO PAULO SAUDI ARABIA SHANGHAI SINGAPORE TOKYO TORONTO WASHINGTON, DC George Borovas Partner and Head-Global Nuclear Tokyo, London george.borovas@shearman.com Copyright 2016 Shearman & Sterling LLP. Shearman & Sterling LLP is a limited liability partnership organized under the laws of the State of Delaware, with an affiliated limited liability partnership organized for the practice of law in the United Kingdom and Italy and an affiliated partnership organized for the practice of law in Hong Kong. *Dr. Sultan Almasoud & Partners in association with Shearman & Sterling LLP shearman.com