• The UK government’s dithering over whether to take an equity stake in a turnkey effort at for the Moorside nuclear project has generated a raft of problems for it.
• The government, which knows it must build the new new reactors, seems to be at sea over coming to terms about how to finance the effort.
• The biggest issue is that Toshiba has yanked KEPCO’s preferred status as a bidder for the project. Meanwhile, KEPCO’s 1400 MW PWR type reference design is making its way through the UK generic design review process.

UK Nuclear New Build – About 19 GWe. Image: WNA

In the last week of July South Korean officials began a series of negotiation meetings with UK government officials to come to terms over how to finance the {L}15 / $20 billion project. The Moorside project, located in Cumbria in northwest England, is being developed by NuGen which is currently owned by Toshiba.

In mid-July Toshiba announced it was fed up with the delays on concluding the negotiations over the terms and price of the sale of NuGen to KEPCO.  In an effort to stop the drain on its finances, it said it would lay off 100 people from the site.

KEPCO was at one time on track to close the deal by September, but delays in getting the government to declare how it would support financing the new build, and KEPCO’s obvious unwilling posture of not wanting to carry the costs on its own. shoved all the parties into their respective corners.

For its part, Toshiba, in an effort to get everyone’s attention, told KEPCO is was no longer a “preferred bidder” for the sale of NuGen.  Last December KEPCO had beaten China’s CGN in an earlier round of negotiations to get that status.

Toshiba still wants to unload NuGen which originally was to be composed of three Westinghouse 1150 MW AP1000 reactors.  With the bankruptcy of Westinghouse, and the failure of the V C Summer project South Carolina, that plan went in the bit bucket.

KEPCO has offered to build two 1400 MW PWR type reactors in their place which would provide about 7% of the electricity needed for the UK. KEPCO is building four of these units in the United Arab Emirates (UAE), and the first one is expected to come online either late this year or in 2019.

Toshiba hasn’t slammed the door in KEPCO, but in downgrading its status as a bidder, it in effect is reopening the bid process to other vendors.  That move is expected to put pressure on KEPCO and the government to come up with a financial plan to save the project.

Better Late than Never

The UK government, in an effort to put the pieces of the project back together, has offered what it calls a “regulated asset base” (RAB) financing model that would do two things.  First, would insure a rate base that would make the project profitable. Second, it would provide a means for the government to take an equity stake in the project by putting up a significant portion of the money needed to building the reactors.

According to World Nuclear News on July 30th the UK Department of Business, Energy, and Industrial Strategy held a meeting with KEPCO to develop a “profitability and risk management plant.” According to a statement from the ministry, as reported by WNN, a government funding decision would be forthcoming once the plan was agreed to by all parties.

A key item will be the final price of the project. If the UK insists on a fixed price, it will not get very far in the negotiations. KEPCO will want the UK government to share the risk of cost escalation due to issues with equipment, construction schedules, or other factors that inevitably come up with a project of this size.

Separately, the South Korean English language news media reported that KEPCO has approached the government there about taking a minority equity stake in the Moorside project as a confidence building measure for the UK government.

If both the UK and the South Korean (ROK) governments are equity partners in the project, it will no longer be a “turnkey effort” similar to the new build in the UAE.

The precedent for the UK equity role is already in place as part of the government’s negotiations with Hitachi for construction of three 1350 MW ABWR type reactors at Wlfa. The UK government has put on the table a proposal to finance as much as two-thirds of the costs of the project through a combination of direct investment, loan guarantees, and regulated rates of return.

Conceivably, the UK and ROK government equity shares could be sold off to private investors once the plants were built and had a period of time operating as reliable and profitable power stations.

South Africa Citing the Costs of Russian Reactors
Says it Can’t Afford Them

South Africa’s President Cyril Ramaphosa said last week that his country can’t afford Russia’s proposal to build four 1200 MW VVER reactors, which is half the size of the plan offered four years ago to then President Zuma.

Ramaphosa said the South African economy can’t afford the cost which would be about $50 billion.  He conveyed his concerns directly to Russian PM Vladimir Putin during a multi-lateral meeting of developing nations that took place in Johannesburg.

A key item may have been that Russia did not offer the same kinds of favorable financial terms it has offered to Egypt and Bangladesh for the multi-reactor projects.

Separately, Eskom, the South African state-owned electric utility, announced it has taken a $2.5 billion loan from China’s Development Bank  to stay afloat financially and to complete construction of the Kusile coal-fired power plant.  The loan represents 62% of the utility’s funding for the coming year according to a press statement from Eskom’s group treasurer Andre Pillay.

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