Nuclear financing the Key concern - Westminster Energy Forum

Monday, 9 February 2009

Angela Piearce, Manager Corporate Finance  KPMG (on secondment from the UK Government department, BERR)

Stocktaking the investment for new build – 2009 cf. 2008 

The investment climate is clearly very different one year on, said Piearce.

A year or so back investment was not really an issue, but she said that as Charles Hendry had said earlier in the event, now financing has risen to be a key concern. 

But she said the fundamentals underpinning nuclear new build in Britain remained good.

We had time to put financing  packages in place and for the lending climate to become more benign than it is right now.

She said that we don’t need the investment right now in early 2009.

The three requirements of favourable economics, favourable political and regulatory environment and availability of finance were still there. Economics were, she said, dependent on the power price and the carbon price.

Public support was also important to investors, and it remained the case that large utilities with strong balance sheets were going to be at the fore.

There were risk management issues around construction (she gave the example of the nuclear project in Finland which had suffered delays around this), markets, with issues around power purchase and offtake agreements, and regulation, including planning and licensing. 

Piearce also flagged up new obstacles to be overcome with big infrastructure projects including reduced availability and increased cost of capital, lack of liquidity, reduced appetite for risk, problems with refinancing and lack of a syndication market.

Projects would probably be more difficult, be more expensive and take longer. 

But as Charles Hendry had said, climate change and security of supply – the latter just recently highlighted by the Russian gas crisis – have made nuclear new build a more, not less, attractive option. 

Return to introduction