British expert explores potential of international consortium for NPP development in Kazakhstan
The construction of a nuclear power plant in Kazakhstan is becoming increasingly tangible, with President Kassym-Jomart Tokayev advocating the establishment of an international consortium that would bring together leading global companies. In an interview with Kazinform News Agency, Malcolm Grimston, Senior Research Fellow at the Centre for Environmental Policy at Imperial College London, discussed how such a consortium could be structured, shared examples of successful initiatives, and highlighted the potential benefits for Kazakhstan.
President Kassym-Jomart Tokayev believes that an international consortium should build a nuclear power plant in Kazakhstan.What might such an international consortium look like in practical terms?
There are various possible models for international funding consortia, but they usually involve a combination of the plant vendor, major international power companies, major power users, 'normal' financial institutions (banks, maybe hedge funds) and sometimes pension funds.
Have there been similar international consortia in the past for nuclear power plant projects, and how did they function?
In the UK Hinkley Point C has been funded by EDF (France), the major partner, and (until December 2023) CGN (China). At one point it was thought that Centrica (UK) might also be part of the project but they withdrew before contracts were signed. Compagnie Française d'Assurance pour le Commerce Extérieur (Coface), the French export credit agency, has provided credits for Areva’s projects in China and Finland and guaranteed €570 million of loans raised by the Finnish utility TVO needed to finance the construction of the Olkiluoto 3 in Finland. Export Development Canada (EDC) is a self-funding state-owned enterprise that provided finance to the Candu Qinshan III project at in China. The Export-Import Bank of China (China Exim Bank) agreed in 2015 to loan Pakistan 85% of the cost of constructing the Karachi Coastal nuclear plant. The Export-Import Bank of Korea (Kexim), which manages the government’s Economic Development Cooperation Fund, provided finance worth $10 billion for the Barakah project in the United Arab Emirates, representing about 60% of the project costs. The Export-Import Bank of the United States (Ex-Im Bank), a government corporation, has extended finance worth $2 billion for the Barakah project to Westinghouse, CH2M Hill, Bechtel and another 20 smaller suppliers. The Swedish Export Credit Corporation (SEK) provided loan guarantees to Finnish utility TVO for the construction of Olkiluoto 3.
What should be the key elements to ensure the success of such a consortium?
The key issue for nuclear financing at present is how to manage the risk that the project overruns on its initial financial costs or construction schedule and how the potential costs of such overruns would be apportioned among different kinds of investor (equity, debt etc.). The Barakah project in the UAE is regarded as having been successful but Olkiluoto 3 ended up in the courts owing to a dispute between the vendor, TVO (a consortium of major power consumers) and the Franco-German consortium that was constructing the plant. Clarity about roles and responsibilities of the various players seems crucial in a successful project.
In your opinion, what are the primary advantages of such an approach for Kazakhstan?
Financing the construction of nuclear plants remains the biggest challenge for the sector. For a nuclear entrant such as Kazakhstan, which has unique advantages in terms of its uranium reserves, developing an international financing approach has several advantages. Financing a $20 billion project, which over five years would represent some 2% of Kazakhstan’s GDP, would be a very great challenge for Kazakhstan to undertake alone. Further, tapping into the growing international experience of such projects would bring benefits in terms of project management.
