International Banks like the World Bank and others have gone out of their way to avoid investing in nuclear energy projects. In the US the Development Finance Corp, after saying last year it was open to making such investments, has made none, and the Export/Import Bank has not taken any public actions in this area either despite news media reports from Poland, Ukraine, and other countries that deals were in the works.
Enter the newly formed International Bank for Nuclear Infrastructure. (IBNI) Its motto is
“Expanding Nuclear Energy for a Sustainable Net Zero World”
IBNI is a conceptual new multilateral international financing institution (IFI). The Bank will provide financing and other support for qualified nuclear energy projects within is member countries. IBNI’s main mission will be to support a Sustainable Net Zero World through the global expansion of nuclear energy. (https://nuclearbank-io-sag.org/)
The bank’s view is that it is necessary for the world to achieve net zero greenhouse gas emissions (Net Zero) by 2050 in order to mitigate the most harmful impacts of global climate change. The world’s energy generation sector will play a dominating role in enabling the world to achieve Sustainable Net Zero by 2050.
Affordable, low carbon, safe and reliable nuclear energy is a necessary and significant component of the World’s collective pathway to reach Net Zero by 2050 in the most sustainable manner. Pursuit of decarbonization through nuclear generation is a sovereign decision. All nations of the world should have access to the responsible and peaceful use of affordable, safe and reliable low carbon nuclear energy.
IBNI is necessary to support a significant investment and expansion of the world’s nuclear energy capacities in the most sustainable manner beginning now. IBNI will support large-scale investment in both today’s proven and commercially proven generation technologies as well as tomorrow’s Advanced Reactors and Small Modular Reactors (SMR) and other emerging nuclear technologies.
What’s Missing in Policy and Finance for Nuclear Energy?
Recent policy developments have confirmed what a number of specialists have believed for a long time: nuclear energy plays an important and increasingly necessary role in getting clean, affordable power to the people. But the COP26 conference and EU taxonomy are only lagging indicators.
An estimated 30 newcomer countries have initiated, and are currently pursuing, nuclear power programs. According to the World Nuclear Association, , up to 100 large reactors are on order or being planned, in countries across the full economic development spectrum. Large reactor developers continue to competitively pursue their markets, while numerous small/advanced modular reactor developers continue to improve their ability to license and deliver their designs as commercial successes.
Missing however from this increasingly optimistic picture is adequate funding, financing and policy initiatives to deliver the projects needed to set the planet on the trajectory to a sustainable net zero.
Enter the International Bank for Nuclear Infrastructure
On the sidelines of COP26, a group of experts from different fields got together with a simple, shared concern: can the nuclear industry respond this time and allow global nuclear capacities to play a critical role in achieving 2050 Net Zero and sustainable energy transitions. Work began on the project in November 2021.
The nuclear renaissance of the 2000s did not deliver, for lack of investable projects and investment. But as COP26 confirmed, this challenge has been turned into an opportunity.
There is massive and increasing demand for climate-friendly investments under ESG, green taxonomy and green bond frameworks. But the global supply of investable nuclear projects is virtually non-existent, and if the capital markets are simply left to their own devices, the prospects of a necessary and material increase in global nuclear generation capacities appears dismal, even with ESG and taxonomy.
The IBNI – Implementation Organization Strategic Advisory Group has a solution to this problem. Formed of specialists from nuclear design and construction, operations, law, finance, banking, economics, regulatory and policy, SAG is writing the blueprint for a future multilateral nuclear infrastructure bank, which will serve as the global enabler and catalyst. (IBNI-IO SAG: https://lnkd.in/dkyiNJWC or https://lnkd.in/dVEwyNun)
Why IBNI?
Currently, there are many fundamental challenges and impediments facing those nations that choose to develop nuclear projects and advance national nuclear program initiatives. These challenges range from access to affordable capital, energy markets and regulatory issues, project size and risk profiles, status of nuclear industry and supply chains, lack of harmonized international standards, public acceptance and nuclear safety and security concerns, affordability and numerous other issues.
IBNI would offer a comprehensive set of multidimensional solutions that address all of these challenges and would thus allow nations to develop and expand nuclear energy in a manner that is better, faster, safer and cheaper.
New Multilateral International Financing Institution
The International Bank for Nuclear Infrastructure (IBNI) is a conceptual new multilateral International Financing Institution (IFI) that will be solely focused on supporting its member countries in developing new nuclear energy programs or expand existing programs as a core component related to their commitments to achieve sustainable net zero CO2 -equivalent emissions by 2050 (2050 Net Zero).
IBNI will provide financing and other support for all its member countries, which are expected to range across all geographies, income levels and developmental status. IBNI will provide financing and other support on open and inclusive and technology-neutral basis for qualifying new-build nuclear energy generators, reactor life-extensions, refinancing and restructuring, nuclear fuel cycle and decommissioning projects.
IBNI will provide both attractive long-term market-based financing solutions for all types of nuclear projects, as well as specialized donor-funded support programs for newcomer nuclear programs, early-stage innovative nuclear technologies, long-term nuclear waste storage projects and other specific programs that will be defined and shaped by donor members.
IBNI will fulfill both leadership and catalytic roles in global nuclear finance (including sustainability), providing comprehensive and multifaceted solutions to its members, helping them overcome the many diverse challenges and impediments currently facing nations and project sponsors with respect to developing and expanding their nuclear capacities.
IBNI financing and support programs will be tied to the expansion of nuclear capacities as a significant component of 2050 Net Zero, offering all its member nations with access to least cost, reliable, safe, clean and abundant nuclear energy in exchange for the member countries’ binding commitments to achieve 2050 Net Zero and other long-term sustainability commitments. Development or expansion of nuclear energy programs also offers near-term security of energy supply in the contexts of many countries.
It is envisaged that IBNI will utilize structures similar to those of the major existing multilateral IFIs (such as the World Bank Group, European Bank for Reconstruction and Development (EBRD), the Asian Development Bank (ADB), etc.), which offer proven models that have been in existence for many decades. IBNI will be adapted to address the unique characteristics of nuclear finance.
Evolution of IBNI Capitalization
Similar to existing major multilateral International Financing Institution models, it is foreseen that the IBNI Member State shareholders will contribute capital in the form of paid-in and callable shareholding subscriptions. Based on various world electricity demand and world nuclear generation share growth scenarios, it is envisaged that an initial total shareholder capital requirement of US $50 billion will be necessary, with 50% (US $25 billion) paid-in and the remaining 50% (US $25 billion) would be pledged as callable shares.
As the program grows over time (the objective of significant growth in global low carbon nuclear capacity is realized), it will be necessary to also periodically increase capital requirements. Capital amounts will be driven by credit rating criteria, so that IBNI maintains ‘triple-A’ category credit ratings and thereby achieves the lowest cost of capital on its bond issuances, which will be passed-down for the benefit of its project participants.
Illustrating the ‘multiplier impact’, under high demand scenarios, it is projected that IBNI could directly support approximately US $1 trillion, which could catalyze approximately US $36 trillion in total worldwide nuclear sector investments over 30-years.
New Nuclear Financing Model
The new IBNI financing model unlocks significant additional and incremental financing sources available for nuclear projects. The financing model also retains (but does not depend on) potential existing sources of financing from export credit agencies, utilities, governments and other sources of potential existing financing. IBNI will serve as the lead ‘anchor’ investor or lender in qualified projects, directly deploying its own capital.
However, IBNI’s participation in the transaction will catalyze other new global capital markets co-investors and financial institutions to co-invest along side IBNI. Similar to models successfully implemented by many other major multilateral IFI’s, IBNI aims to achieve a significant ‘multiplier’ impact where every dollar of government shareholder capital results in many multiples of additional capital available for project investments.
Over time as the IBNI model evolves and gains increasing acceptance by the capital markets and lending institutions, the necessity for IBNI’s direct investment or lending role in projects is expected to become Source: IBNI-IO SAG. (1) ESG = Environmental, Social and Governance criteria.
IBNI Investment Multiplier Impact
Existing multilateral IFIs have exhibited a strong and proven track record of catalyzing significant quantums of global capital investments in the projects and programs that they sponsor. IBNI will utilize similar models that have been proven over many decades to catalyze significant amounts of global capital investments in the nuclear sector. IBNI’s participation in nuclear sector projects will be most impactful in the early years of the program.
As IBNI programs evolve, it is anticipated that the requirements and magnitudes for IBNI’s direct financing and support intervention will lessen over time. Typically, IBNI will support between between 20% and 60% of the total capital costs of supported nuclear projects. IBNI’s support will range from providing long-term loans (direct, A/B and syndicated), minority or quasi-equity shareholding positions, guarantees, credit facilities, hedging products, investment contracts and advisory services.
Timeline and Action Plan
Each nation of the world needs to address the question of how their country is going to achieve Net Zero by 2050. Whether a nation chooses nuclear energy as part of their strategies and policies to achieve Net Zero is a sovereign decision. IBNI’s programs will support those nations that choose to develop or expand their nuclear energy programs.
The required decarbonization of the world’s infrastructure and economic systems will require a very significant increase in electricity generation over the next 30 years. Many nations of the world that have already chosen and it is predictable that many more will choose nuclear energy as a major component of their 2050 low carbon generation mix in order to meet escalating demand for clean electricity generation. There are already 32 nations producing nuclear energy and many countries are also now in the planning stages to add nuclear as part of their future generation mix.
However, if we are collectively going to achieve a Sustainable Net Zero World by 2050, the nations of the world will need to significantly expand nuclear capacities over the next three decades. Under any scenario, decarbonization will require large investments in both the existing affordable, low carbon, safe and reliable proven nuclear technologies, beginning today – as well as the promising emerging advanced reactors, small modular reactors and other nuclear generation technologies of tomorrow. IBNI will also support the life-extensions of the world’s existing safe, reliable and virtually emissions-free fleet or reactors. Furthermore, IBNI will support nuclear fuel cycle projects, from mining through long-term storage of high-level nuclear waste (deep geological repositories). Under all IBNI programs, rigorous nuclear safety, security and safeguards standards will apply.
Currently, the financial resources necessary to finance a large new wave of nuclear projects at a global scale is insufficient and the financing models currently available for nuclear projects are inadequate. IBNI’s support programs and initiatives are the ‘missing link’ in global nuclear finance.
IBNI’s team is now working hard to lay the groundwork for the establishment of IBNI, as soon as possible. It is targeting beginning of 2023 as the time frame for establishing IBNI. However, establishing IBNI in such a short time will be a major undertaking.
IBNO has launched a global fact-based campaign in effort to assemble a broad and diversified coalition of governments; climate, clean energy and sustainability focused philanthropies and non-governmental organizations (NGOs); financial markets organizations and sustainable finance advocates; intergovernmental organizations; the nuclear, hydrogen and clean fuels industries, utilities and other stakeholders.
The global climate crisis requires immediate action – and so does IBNI. IBNI needs to be established and capitalized as soon as possible to support nuclear energy’s role in achieving 2050 net zero – 30-years is an all too short period of time and we are running out of time. It is envisaged that IBNI will be established in early 2023.
immediate step will be to establish the not-for-profit, International Bank for Nuclear Infrastructure – Implementation Organization (IBNI-IO) by the beginning of 2022. IBNI-IO is intended to be an all donor funded organization that will serve to build a broad coalition of nations supporting the IBNI initiative and advise the coalition on establishing IBNI.
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