Financing for Building Nuclear Power Projects : KEPCO s Strategy and Lessons Learned

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1 Financing for Building Nuclear Power Projects : KEPCO s Strategy and Lessons Learned Asia Nuclear Business Platform May 18, 2016 Euiseung Kim General Manager Overseas Nuclear Project Finance Korea Electricc Power Corporation (KEPCO)

2 KEPCO s Solutions on Financing Financing Planning Comprehensive financing plan on building nuclear power plants from owner s perspective Financing Planning Various funding package options with the combination of debt and equity Meeting owner s financial needs Debt Financing Equity Financing Debt Financing ECA financing Korea Eximbank, K-sure, Co-financing with other ECAs Korean government-backed financing Direct loans, Guarantee/Insurance Long-term finance, Bridge loan, Hedging, etc Commercial financing International commercial banks / financial institutions, etc Unsecured loan, ECA-covered loan Long-term finance, Bridge loan, Hedging, etc Equity Financing Co-investment with local partners Equity funding options considering project-specific conditions Long-term partnership with risk-sharing structure 2 / 8

3 KEPCO s Strategy on Investment Establishing long-term Strategic partnership with local entities and contributing to stable construction and operation of nuclear power plants Meeting host countries financing & investment needs Various investment options - Construction, Fuel, Operation & Maintenance, etc. - Equity size, Investment horizon, Ownership, etc. Co-investment with local credit-worthy entities backed by host government Off-balance sheet financing basis Robust project economics Optimal project risk allocation Country-specific investment strategy, etc. 3 / 8

4 KEPCO s Competitiveness in NPPs Cost competitiveness On-time delivery Single point contractor Supply chain Human resources & know-how Immediate implementation Construction track record Operating performance Financing experience Financial capability Proven technology provider Relationship with ECAs / banks 4 / 8

5 Barakah Nuclear Power Project Project Overview Capacity Construction progress Construction schedule 5600MW (APR1400 four units) Total - 62%, Unit 1-87% (April 2016) Unit1 Completion : 2017 (scheduled) The following three units will be completed in 2018, 2019, and 2020 The completion of significant milestone is well underway Major Achievement of Construction Installed the reactor vessel of unit 1 (May, 2014 ) Submitted Operating License application for unit1 & 2 (March, 2015) Completed CHT(Cold Hydrostatic Testing) for commissioning (Feb, 2016) Installed the reactor vessel of unit 2 (June, 2015) Completed construction of the concrete dome for RCB(Reactor Containment Building) (April, 2016) Sourced by ENEC(Emirates Nuclear Energy Corporation)Press Release 5 / 8

6 Challenges on Financing NPPs Feasible risk allocation Sharing nuclear completion risks financial obligations Viability of step-in remedy during the operating period, etc. Finding the right equity partners / EPC contractors with financial capability (strong balance sheets) and credit support appetite Quantum of total funding requirement Lack of appetite and liquidity in commercial sources of funds Choosing proper host government support regime Time-consuming process Change of experienced key personnel Inconsistency / non-transparency in financing policy / strategy Complicated project stakeholder interface Impact of localization requirements on financing Oil price decline and economic recession, etc. 6 / 8

7 Opportunities for Financing NPPs Successful nuclear construction milestone achievements in Barakah project as a new industry track record Introducing alternative state aid regimes in EU (CfD, loan guarantee, etc.) Increased stakeholders understanding that the host government role is essential in financing and investing in NPPs Understanding that deal structure needs to be attractive to all participants (equity investors, lenders, host government, etc.) in terms of project risk allocation ECAs appetites for extending credit in NPPs Heightened role of NPPs as a carbon-free energy source Cost-competitiveness against advanced renewable energy technologies Identified many key challenges for financing through making several attempts to finance NPPs on limited-recourse project finance basis and industry still pursuing feasible and replicable solutions 7 / 8

8 Thank you Euiseung Kim General Manager, Overseas Nuclear Project Finance Korea Electric Power Corporation (KEPCO)