| Abstract: |
This paper considers the prospects for financing a wave of new nuclear power
plants (NPP) using project financing, which is used widely in large capital
intensive infrastructure investments, including the power and gas sectors, but
has not previously been used for nuclear power. It argues that the first few
NPPs will have to be financed on balance sheet by large corporations because
these plants need to build a positive record on construction risk. If that
record can be built there is no reason in principle why large scale project
financing should be denied to NPPs. The projects will probably need to have a
long term power offtake project, requiring a creditworthy electricity
supplier, but this is feasible even in liberalised but relatively
oligopolistic power markets like the UK. Interviews with practitioners in the
project finance sector confirm that banks are interested, in principle, in
lending for nuclear power stations. Project finance would also readily allow
multiple shareholdings in individual plants. This in turn would provide the
means for power companies to diversify their plant risk and for third party
financial shareholders to invest in diversified portfolios. This last feature
could open up a new route for significant equity investment in NPPs. The
analysis concentrates on the UK but is potentially of wider application. |