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Financial Risks Associated with Nuclear New Build Discussed at IAEA

Unit 2 construction site at the Virgil C. Summer Nuclear Generating Station in South Carolina, USA.  (Photo: SCE&G)

Given the large capital expenditures involved in nuclear new build projects, efficient management of the risks that can lead to financial losses is crucial for project success. A lack of understanding of basic financial risk management principles can result in a project’s failure even before construction gets underway.

A Technical Meeting on managing nuclear new build financing risks was held at the IAEA, 2-4 August 2017. The Technical Meeting highlighted the recently published IAEA Nuclear Energy Series publication, Managing the Financial Risk Associated with the Financing of New Nuclear Power Projects (NE Series NG-T-4.6), which describes how engineering risks translate to financial risks. Effectively managing these can influence a project’s capital costs.

“Good financial risk management is crucial to developing a successful nuclear power project”, said Daniel Dean, an IAEA expert who participated in the meeting. “The Technical Meeting has provided participants from 20 Member States with an overview of the key ideas and tools they will need to manage financial risk effectively.”

Undoubtedly, financial risk management is typically not something that is engaged in after having signed contracts with vendors, procurement and construction contractors, but rather, an area in which project proponents should engage from the outset of any new build project.

Despite its importance, financial risk management in nuclear new build programmes remains an area where project proponents lack extensive experience. Although proponents can - and almost always do - hire specialized financial advisers to help them in this area, it is clearly desirable that they have a basic understanding of the topic themselves.

Good financial risk management is crucial to developing a successful nuclear power project
Daniel Dean, IAEA expert