regulatory issues for setting up a nuclear power plant

NUCLEAR POWER PROJECTS

• INFRASTRUCTURE ISSUES

• RISK MITIGATION

• DEVELOPMENT CONSIDERATIONS

• TENDERING

• CONTRACT

• FINANCE MODELS

• LEGAL FRAMEWORK

INDIAN INSTITUTE OF TECHNOLOGY KHARAGPURI N F R A S T R U C T U R E R E G U L A T O R Y I S S U E S

Presented by: P R A T E E K D A S G U P T AP R A N A V M I S H R A

When a neutron strikes an atom of uranium, the uranium splits into two lighter atoms and releases heat simultaneously.

This heat energy is used for various purpose, such as electrical power generation, powering submarines, space shuttles, nuclear bombs and missiles etc.

It doesn’t emit any polluting gases which have adverse effects such as Global Warming, Acid Rain, Ozone Depletion etc.

It is a highly concentrated source of energy, with 1 kg Uranium producing power of over 50,000 kWh and 35,00,000 kWh on reprocessing.

N U C L EA R E N E R GY


N U C L EA R P OW E R P R OJ EC T S TA G E S


A nuclear power plant essentially has 5 stages

• Pre-Project

• Project Decision Making

• Plant Construction

• Plant Operation

• Plant Decommissioning

The overall project life of Nuclear Power Plant is about 75 – 100 years

N U C L EA R P OW E R P R OJ EC T S TA G E S


N U C L EA R I N F R A S T RU C T U R E I S S U E S


International Agreements and Safeguards

Financial Resources

Nuclear Law

Educational Programmes

Public Consultation

Engineering / Manufacturing

Human Resources

Project Management

Regulatory Framework

Codes and standards

Safety Assessment Capabilities

Physical Facilities

Communication

Procurement

Emergency Response Planning

Construction / Commissioning

N U C L EA R R I S K S A N D M I T I G AT I O N


A S S O C I AT E D O R G A N I Z AT I O N S


THE GOVERNMENT (policy making)

• Energy Supply• Safety and Regulation• Environmental protection• Domestic Infrastructure development

THE FUTURE PLANT OWNER

• Electricity system expansion planning• Performance of economic analyses• Defining the projects• Obtaining licensing and executing them

and operating the plant safely

THE NUCLEAR REGULATORY BODY

• Safety of pressure vessels, electrical installations, pollution control, environmental protection• Promotion and Co-ordination between various R&D organizations• Encourage participation for Nuclear Power Plant Projects• Advancement of educational institutions

D E V E LO P M E N T C O N S I D E R AT I O N S


LAWS

• Law and regulations for radiation protection

• Law and regulations for safety of nuclear installations

• Compatibility of national radiation protection and nuclear safety regulations with IAEA codes

• Law and regulations for ownership of nuclear installations and materials

• Law or policy concerning nuclear third party liability

• Bilateral nuclear supply agreements

• Conventions on early notification and assistance

• Physical protection convention

• Nuclear safety convention

• Convention on safety of waste and spent fuel management

Radiation Protection

Plant / Material Ownership

Nuclear SafetyLaws Concerning



ENERGY AND ELECTRICITY SUPPLY POLICIES

• National Development policies and plan.

• Implementation mechanisms for National Development plan.

• National policies for the Energy and Electricity sectors. Perceptions of major constraints, priorities.

• Electricity tariff policies.

• Environmental Protection Policies and their impact on the energy sector.

FINANCIAL MECHANISM

• Mechanisms for International Financing.

• Mechanisms for Local Financing.



INTERNATIONAL AGREEMENTS

• Treaty on the non-proliferation of Nuclear weapons (NPT) INFCIRC/140

• Guidelines for Nuclear transfers, 1993 revision of NSG London guidelines

• Convention on the prevention of Marine pollution by dumping of wastes and other matter (London

Dumping Convention), INFCIRC/205

• International Convention for the safety of life at sea

• Convention for the suppression of Acts of Nuclear Terrorism

T E N D E R S


Information provided by the owner

1. INVITATION LETTER2. ADMINISTRATIVE INSTRUCTIONS3. GENERAL INFORMATION4. TECHNICAL REQUIREMENTS 5. SCOPE OF SUPPLY AND SERVICES6. NATIONAL PARTICIPATION7. BID EVALUATION CRITERIA8. DRAFT CONTRACT TERMS AND CONDITIONS9. COMMERCIAL CONDITIONS10. SAFETY AND SECURITY CONSTRAINTS

Information requested from bidders

1. GENERAL INFORMATION2. GENERAL TECHNICAL ASPECTS3. TECHNICAL DESCRIPTIONS4. SCOPE OF SUPPLY AND SERVICES5. ALTERNATIVES AND OPTIONS6. QUALITY ASSURANCE PROGRAMME7. TRAINING8. PROJECT SCHEDULE9. TECHNOLOGY TRANSFER10. GUARANTEES AND WARRANTIES11. DEVIATIONS AND EXCEPTIONS12. COMMERCIAL CONDITIONS

C O N T R A C T


Contract conditions

• Financing arrangements• Down-payments• Governmental approval or authorization• International commitments• Safeguards requirements• Export license, construction license, operation license• Pertinent regulatory and licensing requirements.

1. The owner has one contract with the main supplier.

2. The main supplier has overall responsibility for construction, and turns over responsibility for the project to the owner/operator in stages during the commissioning phase.

1. The owner has multiple contracts with suppliers.

2. The overall responsibility is divided between a relatively small number of contractors, each building a large section of the work.

Turnkey Contract Split Package Contract

C O N T R A C T


•Definitions•General clauses•Object of the contract•Planning and execution of the work•Information, inspection, testing and control•Assignment of the work and subcontracting•National participation and technology transfer•Training of personnel•Changes and additional work•Transport and customs clearance•Risks and transfer of title•Liability•Insurances•Quality assurance

•Licensing•Delivery times•Documentation•Spare and wear parts, consumables and special tools•Guarantees or warranties•Take-over•Prices, price adjustments and terms of payment•Force majeure•Termination and suspension of the contract•Guarantee of title and proprietary information•Execution of the contract•Applicable law•Arbitration

Contract Components

F I N A N C I N G


Major Challenges

• The high capital cost and technical complexity of NPPs,

which present relatively high risks during both construction

and operation

• The relatively long period required to recoup investments

or to repay loans for NPP construction, which increases the

risk from electricity market uncertainties

• The often controversial nature of nuclear projects, which

gives rise to additional political and regulatory risks

• The need for clear solutions and financing schemes for

radioactive waste management and decommissioning,

which only governments can formulate

F I N A N C I N G


Financial Model for project fully financed through government guarantee.

F I N A N C I N G


Financial Model for Public Private Partnership projects.

The private sector investors bring the equity and loans and the government participates through assets and risk mitigation mechanisms.

L EG A L F R A M E WO R K


Nuclear laws and regulations address the following

• THE SAFETY PRINCIPLE (PREVENTION AND PROTECTION)

• THE SECURITY PRINCIPLE (PEACEFUL USE OF NUCLEAR POWER)

• THE RESPONSIBILITY PRINCIPLE (OPERATOR OR LICENSEE)

• THE PERMISSION PRINCIPLE (REVIEW AND AUTHORIZATION BY REGULATORY BODY)

• THE CONTINUOUS CONTROL PRINCIPLE (RIGHT OF INSPECTION AND ACCESS BY THE

REGULATORY BODY)

• THE COMPENSATION PRINCIPLE (EXTENT OF NUCLEAR LIABILITY)

• THE SUSTAINABLE DEVELOPMENT PRINCIPLE (PROTECTION OF FUTURE)

• THE COMPLIANCE PRINCIPLE (INTERNATIONAL AND TRANSBOUNDARY AGREEMENTS, TREATIES

AND CONVENTIONS)



List of clearances required for setting up a Nuclear Power Plant

1. Clearance of the Ministry of Environment and Forests2. Clearances from the Gol (Civil Aviation Department) and the Director, National Airports

Authority in connection with the height of any chimneys.3. Confirmations from the Department of Economic Affairs, Ministry of Finance, the Department

of Industrial Development, Ministry of Industry, the Department Company Affairs and the RBI, that the Company is permitted to enter into the Financing Agreements,

4. Consent of Gol to the issue of equity to Foreign investors5. Consent of RBI for the subscription by he Foreign Investors in Shares in the Company pursuant

to Section-29 of FEMA (Foreign Exchange Management Act 1999)6. Consent of RBI for the provision by the Company of guarantees and / or indemnities and the

ability of lenders and suppliers to receive payments in enforcement thereon including liquidated damages pursuant to Section-9 and 26 of FEMA 1999.

7. Consent of RBI for payment to non-resident directors of the Company-Commissioner of Electricity

8. Consent of RBI for the Company to establish and office outside India pursuant to Section-8 of FEMA 1999 and to acquire immovable property to Section-25 of FEMA, 1999

9. Approval of the Chief Engineer Inspector for the Power Station




10. Exemption from Section-10(15)(iv) of the Income Tax Act 1961 in connection with the interest and other charges payment by the company on offshore debt

11. Permission from the Director General of Foreign Trade for the various imports pursuant to the Foreign Trade (Development and Regulation) Act 1992.

12. Land acquisition Power plant – Land Acquisition Act 189413. Techno economic clearance under section 30 of Electricity Supply) Act, 194814. Permission from the Directorate General of Technical Development / Director General of

Foreign Trade to import helicopters, Aircrafts, Ships or other such vessels under the Foreign Trade (Development and Regulation) Act, 1992

15. Consent under the Factories Act 1948 relating to firefighting capability16. Tax confirmations and clarification in relation to the treatment of capital gains and offshore

securities offered by the Company and exemptions under Section-10(15)(iv) of the Income Tax Act, 1961 in relation to any interest payable by the Company on offshore debt securities.




17. A certificate form the General Insurance Corporation or any of its subsidiaries to the effect that such insurance or reinsurance cannot be obtained from them

18. Consent from the Gol (Controller of Insurance) to the effecting by the Company of such insurance and / or reinsurance with offshore insurers and/ reinsures and

19. Consent from RBI under FERA 1973/FEMA 1999 for the taking out of insurance and / or reinsurance with offshore insures and / or reinsures and for the payment of any premiums thereunder

20. Permission from the Director General of Foreign Trade for the import of spares pursuant to the Foreign Trade Development and Regulation Act 1992

21. Consent of the Direction General of Civil Aviation to use and operate an airstrip and helicopter landing pad, and use and operate a helicopter and / or other aircraft pursuant of the Aircraft Act 1934



NUCLEAR LIABILITY BILL

India framed the civil liability for Nuclear damage bill 2010, which stipulates the compensation burden on the state-run reactor operator, the liability of government and the responsibility of private suppliers and contractors.

Some major features of the bill are:

• The Atomic Energy Regulatory Board has to notify a nuclear incident within 15 days from the date of a nuclear incident occurring.

• The operator of a nuclear installation will be liable for nuclear damage caused by a nuclear incident in that installation or if he is in charge of nuclear material that caused the incident.

• If more than one operator is liable for nuclear damage, all operators shall be jointly, and severally liable to pay compensation for the damage.

• The Bill states that the total liability for a nuclear incident shall not exceed the rupee equivalent of 300 million Special Drawing Rights (Approximately Rs. 2100 crore)

T H E ATO M I C E N E R GY A C T, 1 9 6 2


Section 2-1-(e) "Plant" includes machinery, equipment or appliance whether affixed to land or not.

Section 3-1-(e)To provide for control over radioactive substances orradiation generating plant in order to -• Prevent radiation hazards• Secure public safety and safety of persons handling radioactive substances • Ensure safe disposal of radioactive wastes.

The Atomic Energy Regulatory Board (AERB) was constituted on November 15, 1983 by the President of India by exercising the powers conferred by Section 27 of the Atomic Energy Act, 1962 (33 of 1962) to carry out certain regulatory and safety functions under the Act. The regulatory authority of AERB is derived from the rules and notifications promulgated under the Atomic Energy Act, 1962 and the Environmental (Protection) Act, 1986

Some of the important sections of the Atomic Energy Act are given as follows.

T H E ATO M I C E N E R GY A C T, 1 9 6 2


Section 10.1-(c)Rights to use and occupy the surface of any land for the purpose of erecting any necessary buildings and installing any necessary plant

Section 10-1-(d) Rights to use and occupy for the purpose of working the minerals and to use or acquire any plant used in connection with any such mine or quarry

Section 10-(3) Compensation in respect of any right acquired under this section shall be paid in accordance with section 21

Section 22(1) Notwithstanding anything contained in the Electricity (Supply) Act1948, the Central Government shall have authority -(a) to develop a sound and adequate national policy in regard to atomic power, to co-ordinate such policy with the Central Electricity Authority and the State Electricity Boards constituted under section 3 and 5(b) to fix rates for and regulate the supply of electricity from atomic power stations, with the concurrence of the Central Electricity Authority

N U C L EA R P OW E R I N I N D I A


The Nuclear Power Corporation of India Limited (NPCIL), a Public Sector Undertaking (PSU) under the Department of Atomic Energy, was registered as a public limited company under the Companies Act in September, 1987 with the objective of operating the Atomic Power Stations and implementing the Atomic Power Projects for the generation of electricity in pursuance of the schemes and programmes of the Government of India under the Atomic Energy Act, 1962.

N U C L EA R P OW E R P R OJ EC T S


regulatory issues for setting up a nuclear power plant

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