To continue the nuclear theme of my last blog, which considered the legal and regulatory frameworks necessary for a country aspiring to nuclear power, and suggested that the UAE had set the bar high in its progress to date, this blog looks at what other countries in the region are up to and how all these projects might be financed.
I had the good fortune to attend the Middle East Nuclear Energy Summit in Amman, Jordan last month. Jordan is arguably second only to the UAE in the race for peaceful nuclear energy. Indeed the Chairman of the Jordan Atomic Energy Commission told the conference of his country’s plan to become a net exporter of electricity, and to use their indigenous supply of uranium as part collateral to assist with the financing of new nuclear new build. There has been further progress in Jordan since the conference with the site selection team identifying suitable sites for a nuclear power plant, the inauguration of a waste facility for low and medium level waste and the award of a contract to build a 5MW research reactor.
Other countries in the region plan to follow suit: at the conference we heard from representatives from Bahrain and Yemen who are considering nuclear power. Separately the Kingdom of Saudia Arabia recently launched plans to consider the feasibility of nuclear power, and Qatar, Kuwait and Oman are reputed to be engaged in similar plans.
However it was clear from all the speakers that one of the big unresolved issues for many of them (and for some countries in the region this will be more critical than for others as there is a vast disparity in wealth), is securing the financing that will be necessary to pay for these very capital intensive projects. There was a good deal of debate on whether project financing, which has been successfully used in a number of countries in the region to finance significant power and water projects, could be the answer.
As the global nuclear renaissance marches on and the world becomes more familiar and relaxed about nuclear technology it seems likely that in due course there will be a nuclear power project that is project financed. For now though, risks that will concern lenders of project will be many and varied but are likely to include political risk, the reliability of the chosen technology and the reliability of the price to build it, the legal and regulatory frameworks including the robustness of the licensing regime and the nuclear liability regime, demand risk and so on. Arguably, many of the mitigants to these risks (eg robust licensing frameworks, de-politicised decision making, compliance with international conventions on third party nuclear liability) are more readily found in countries with experience of nuclear power and which are well immersed in the nuclear industry, rather than countries seeking to build their first nuclear power plant. Jordan may be an exception that proves this rule though as it has clearly evinced an intention to adopt a PPP model for delivery of its nuclear power ambitions. Indeed Abu Dhabi is also reputedly about to appoint a further set of financial advisers which suggests they again might be about to break new ground. Time will tell.
It must be the case though that not every Middle Eastern country claiming an interest in nuclear power will be successful. The reasons are well documented in the industry and the problems well rehearsed – there are serious shortages in the supply chain to meet the current and predicted global demand, there are insufficient people with the sufficient skills and experience to meet the current and predicted global demand, and perhaps even more obviously the economics don’t make sense: if most countries in the region have a nuclear power plant, to whom will they all export their electricity?