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Small Reactor Choices: Financing, Challenges & Prospects

© Bloomberg New Energy Finance, 2004-2010

Bloomberg New Energy Finance analysis overview

MENA Nuclear Construction Conference, Dubai

29 September 2010

Chris Gadomski, Lead Analyst, Nuclear

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2 MENA Nuclear Construction Conference, September 29, 2010

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Bloomberg New Energy Finance introduction and overview

What do new reactors cost?

Many choices

Key financial points

Small Mini & Scalable Modular Reactors


Key financial points

Connecting to the grid

New Developments

Prospects

Challenges

New developments

How much do new nuclear plants cost?


Volatile Natural Gas Prices Impact Utility Decision Making


KATY HUB (Texas) Natural Gas Prices Source: Bloomberg

Natural Gas Futures—Bearish or Bullish long-term?


Source: Bloomberg

Building New Large Reactors Present Financial Risks

Illustrative “year spent” cost of

conventional 2,200MW twin unit

AP1000 nuclear new-build:

$11.0—$17.6bn

Equity value

Enterprise value$39.9

$39.0

$34.4

$29.7

$24.7

$22.2$21.1

$27.2

(All figures are in billions of US$’s)


$21.1

$17.0 $16.4

$12.9 $12.8 $12.4

$7.6

$20.8

$16.7 $16.2

$11.3 $11.6

$9.0 $9.4

$3.9 $4.1 $3.4$4.3

$3.2

SO EXC D DUK FE ETR PGN PPL NRG DTE CEG AEE SCG

$17.6

$11.0

Source: JPMorgan; FactSet as of 3/13/09, from NuScale

“Big” Nuclear Investment Worries Rating Agency

Oglethorpe on review for possible downgrade—30% investment in Vogtle to blame

• Multi-year capital spending plan increasing business risk without credit metrics or cash flows improvement

• $4.2bn commitment for 30% of


Vogtle is centerpiece of build-out• Internal cash flows,

• public debt capital market,

• DOE loan program

• Company has 11% equity to capitalization…below 20-35% range for other A-rated electric cooperatives

Source: Moody’s Sept 14, 2010

Small and Small Modular Nuclear—Many Choices (50+)

• Name Capacity Type Developer

• KLT-40S 35 MWe PWR OKBM, Russia

• VK-300 300 MWe PWR Atomenergoproekt, Russia

• CAREM 27 MWe PWR CNEA & INVAP, Argentina

• IRIS 100-335 MWe PWR Westinghouse-led,

• mPower 125 MWe PWR Babcock & Wilcox, USA

• SMART 100 MWe PWR KAERI, South Korea


• SMART 100 MWe PWR KAERI, South Korea

• NuScale 45 MWe PWR NuScale Power, USA

• HTR-PM 2x105 MWe HTR INET & Huaneng, China

• PHWR 220 MWe PHWR NPCIL, India

• GT-MHR 285 MWe HTR GA/(USA), Rosatom (Russia)

• BREST 300 MWe LMR RDIPE, Russia

• SVBR-100 100 MWe LMR Rosatom/En+, Russia

• FUJI 100 MWe MSR ITHMSO, Japan-Russia-USAWNA:

Small and Small Modular Reactors—Prominent US/Japanese Efforts

HyperionHyperion

Toshiba 4SToshiba 4S


B&WB&W

NuScale

Small and Small Modular Reactors—other prominent efforts

PBMR, 170MWe, Project recently abandoned by South AfricaPBMR, 170MWe, Project recently abandoned by South Africa

ChinergyChinergy, 100MWe HTR-PM, China


CAREM, 27MWe scaleable to 300MWe, Argentina (INVAP)…goal is to have operational prototype by 2015

OKBM, Acme and other various designs from 4-295MWe, Russia

Recognize the distinction—Small vs. Modular Scaleable Reactors

Small or Mini Reactors

• Stand alone operation

• Size• 10MWs to 100MWs

• Remote applications• Mining

• Grid connected

• Size is scalable to 1GW• 45 MW increments

• 125 MW increments

• Utility applications

Modular Scalable Reactors


• Mining

• Small villages

• Desalination

• Industrial process heat

• Examples:• Hyperion

• Toshiba 4S

• Carem

• Utility applications• Scale supply to demand

• Green plant capacity, ie., switch from coal and gas to small nuclear

• Examples:• NuScale

• Babcock & Willcox

Safety Issues—some examples

NSSS is prefabricated and shipped to siteNSSS is prefabricated and shipped to site

Natural Circulation CoolingNatural Circulation Cooling


Proven LWR technology build safely below groundProven LWR technology build safely below ground

Large natural heat sink

Toshiba 4s

Super-safe, Small & Simple

• 10MWe or 30MWt version

• Sodium cooled

• 30 years without refueling

• Uranium/zirconium fuel enriched to< 20%


< 20%

• Plant cost projected at US$2500/kw

• LCOE of $.05-.07/kWh

• Target market: remote power, desalination, hydrogen production.

• NRC expects application for design approval Q2 2012.

Source: Toshiba/WNA/NRC/BNEF:

Hyperion-Mini Power Reactor

Sealed core, Safe & Secure

• 25MWe and 70MWt

• Lead bismuth (LBE) cooled

• 8-10 years without refueling

• Uranium nitride fuel enriched to < 20%


enriched to < 20%

• Plant cost projected at US$2-4,000/kw

• LCOE of <US$.10/kWh

• Target market: remote power, desalination, military, mining.

• Pursuing Combined License and/or Design Certification 2012.

Hyperion Power Generation

Russian Floating Reactors

Akademik Lomonosov launched June 2010

• 80MWe

• Lead bismuth (LBE) cooled?

• Plant cost projected at US$???/kw

• Target markets:


• Target markets: • remote power,

• desalination,

• oil exploration.

• Reactors “Ready” Q4 2012

• Six potential sites chosen for northern Russia.

“A reference plant for the international market”

Rosatom

NuScale—Small Modular LWR Reactor

Prefabricated, Simple, Safe

• Factory built, transportable 45MWe module scaleable to 540MWe

• Natural circulation cooling

• 24 month refueling cycle

• UO2 pellets enriched to ~4.95%


• UO2 pellets enriched to ~4.95%

• Plant cost projected at US$4100/kw

• LCOE of $.07 to .10/kWh

• Target market: grid power generation

• NRC expects application for design approval H2 2012.

NuScale

Babcock & Willcox mPower (Advanced light water reactor)

Multi-unit (1-10+) Scalable 125 to 750MWe

• 125MWe and 400MWt

• Air-cooled

• Refueling: 4 to 5 years

• Fuel design: proprietary?

• Plant cost projected at


• Plant cost projected at < US$5,000/kw, ie, $600-750m for 125 Mwe*

• LCOE of US$47-95/MWh (500MWe)

• Target market: grid connected power, fossil plant replacement

• NRC: Pursuing Design CertificationQ4 2012.

• More plausible initial configuration likely to be 250MWs priced at $1.5bnSource: Babcock & Willcox

Key Financial Points—Reducing risk

OperationalOperational—SMRs mitigate single shaft risk

Construction—Offsite manufacturing reduces risk & cost

--plug and play simplifies onsite construction management


RegulatoryRegulatory—FOAK licensing processes, more or less?

Supply—smaller equipment scale means broader supply chain,

--eliminate global choke points

Key Financial Points—Reduces Cost of Capital

Shorter deployment/construction time

--Interest for 3 vs. 5+, enables CWIP

Incremental build lowers initial capital investment

--$2-2.5bn vs. $11-17bn


Cash flow during constructionCash flow during construction

Preserving corporate ratings--Moody’s downgrades Oglethorpe

Financial exposure to Vogtle 3&4

SMR Incremental Build Offers Optionality

Cooling Towers

Turbine Building and 6 Turbine Generators

12 Power Modules

Cooling Towers

Initial installment (270 MWe) Final Installment (540 MWe)


Source: NuScale

12 Power Modules

Final Installment

Turbine Building and 6 Turbine Generators

6 Power ModulesGSU Transformers

23

Levelized Cost of Electricity of various options


Source: BNEF LCOE analysis function, and BNEF estimates

Sample 540 MW Life Cycle Cost Estimate

• NuScale has invested in a detailed life cycle cost analysis for a 12 module (540 MW) NuScale facility. Major Assumptions include:

– EPC price of $4100/kw; 36 month construction schedule. Owner cost of $50 mm for COLA but no additional owner costs.

– 60% debt financed at 8%/10.5% cost of equity for an Investor Owned Utility (IOU); 100% debt at 5% tax free for a public utility.

– Fuel cost of $5.50/MWh

– 3% cost escalation.


Source NuScale

25

Lifecycle Cost in $/MWh

1st Year Levelized 1st Year Levelized

Capital 69.0$ 69.3$ 35.9$ 35.4$

O&M 14.4$ 18.9$ 13.9$ 21.5$

Fuel (Fuel and Fuel Waste Costs) 6.7$ 8.6$ 6.5$ 9.6$

Other Costs (Interest Income) (0.0)$ (0.6)$ (0.0)$ (0.9)$

Decommissioning 1.4$ 1.9$ 1.3$ 2.1$

Total 91.3$ 98.1$ 57.6$ 67.7$

IOU Financing Public Financing

Connecting Small Reactors to the Grid

General rule of thumbGeneral rule of thumb—No single unit larger than 15%

80% of countries can’t swallow 1000MW plants

Even the UK will require transmission expansion


Match capacity additions to electricity demand growth

Opportunity to service grids under 4GWs

New Developments

Bechtel teams with mPower. --This $30.8bn (2009 revenues) company is now 20% partner. Bechtel has worked on 2/3rds of US plants.

Light water SMRs to receive NRC attention,


Light water SMRs to receive NRC attention,

FY2011 DOE cost sharing support to increase from $39 to $55m

Hyperion to build 25 MWe fast reactor prototype at US DOE Laboratory

Savannah River Site by 2018 to produce hydrogen to make biofuels.

Financing Strategies

Cash?Cash?

Project Financing? Project Financing?


Multilateral Banks/Export Credit Agency/Vendor Financing?Multilateral Banks/Export Credit Agency/Vendor Financing?

Balance Sheet?

Challenges—Vaporware? Are SMRs 10 years away and counting?

Regulatory Issues…Reactors await design certification & licensing--Should different rules apply?

Will economics work out?


Will economics work out? --Are SMRs really cheaper, safer, easier to build, and more efficient?

Security and proliferation issues? --How real are the concerns?

Prospects For SMRs

Initial IAEA forecast by 2030:

-- 100 high case/40 low case

IAEA also projects by 2040-2050:


IAEA also projects by 2040-2050:

--up to 1000 SMRs

BNEF assessing global global market. Preliminary results suggest: --IAEA may be too conservative in the near term,

--IAEA may be too aggressive in the long term.

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