Workshop on the Cost Estimation and Cost Analysis of Nuclear Projects and Programmes, Idaho National Laboratory, Idaho Falls, USA, 30 September to 3 October 2019 Cost Assessment of Bulgarian Nuclear Newbuild Projects Ivanova Nina, PhD Head of Finance and Administration Dept. Kozloduy Nuclear Power Plant – New Builds Plc. ‘KOZLODUY NUCLEAR POWER PLANT – NEW BUILDS’ PLC Operational Sunk Average Bookkeeping Opportunity Social Private Investment cost cost Decommissioning cost O&M cost Fuel cost Marginal 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. i. Capital cost ii. Plant operating cost 40% 60% Capital cost Plant operating cost Long-term nuclear waste disposal Nuclear Damage Liabilities Non-Proliferation 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Rd – cost of debt Re – cost of equity % D-market value of debt E-market value of equity WACC – weighted average capital cost, t - corporate tax rate WACC other +Risk premium nuclear =WACC Nuclear (2) 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Type of Investor and Cost of Capital Public 10% investors Private investors in 5% regulated markets Private investors in 0% liberalized markets Type of investor Source: Role of Government by [Kee, 2012] Total Investment Costs (TIC) Overnight Construction Financial Capital cost Costs (OCC) costs escalation Engineering, Procurement Owner’s Contingency Interest &Construction Provision During costs Costs (CP) Construction (OC) (EPCC) % 15% 80% 5% 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. • Nuclear fuel and reagents; Fixed • External services; • Nuclear damage 20% insurance, etc. Fuel cycle costs 65% O&M costs • Water used Variable • Materials 15% • Other services, etc. Decommisioning 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. ( + & + + + 1 + ) = = ( (1 + ) )) − ∑ ∗ − - The amount of electricity produced in the∑ year “t” ∗ Construction period - The constant price of electricity (1 + ) - The discount factor for year “t” − - Investment costs in year “t” & - Operations and maintenance costs in year “t” -Fuel costs in year “t” - Carbon costs in year “t” - Decommissioning cost in year “t” Projected nuclear LCOE costs for plants built 2015-2020, $/MWh Source: OECD/IEA-NEA, Projected Costs of Generating Electricity, 2015 Edition, 85% capacity factor 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Research reactor Kozloduy NPP Belene NPP site - 1957: Bulgaria became one - 1970-1975: Construction and - 1981: Approval for the of the IAEA states–founders commissioning of units 1 and 2 construction of a second - 1957: The Committee for with WWER-440 , model В-230; Bulgarian NPP Peaceful Use of Atomic - 1973-1982: Construction and - 1990: The construction was Energy (CPUAE) has been commissioning of Units 3 and 4 frozen due to lack of financial established with WWER-440 upgraded resources - 1961: Start of operation of model В-230 - 2002: the Government IRT-2000 - 1980-1991: Construction and decided in-principle to restart - 1966: An agreement for commissioning of Units 5 and 6 of the Belene Project commercial reactors for with WWER-1000, model В-320 - 2012: The Council of electricity production was Ministers decided to terminate signed the Belene project 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. In 2012, the Council of Ministers took a decision in principle for construction of a new nuclear power plant at the Kozloduy NPP site. The investment proposal is the construction of a new power plant unit with a generation III or III+ light-water reactor technology with installed capacity ~ 1200 MW, considering the possibility of building a second identical power unit. On May 9th 2012 the project company “Kozloduy NPP - New builds” Plc. was established, with Kozloduy NPP being the sole owner of the capital. The company is part of a vertically integrated holding group – Bulgarian Energy Holding (BEH) with a principle - the Ministry of energy KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS (KNPP-NB) 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Feasibility stage Technical – economic analysis for the construction of new nuclear unit on the Kozloduy NPP site Investigation and determination of the site for new nuclear capacity at the site of Kozloduy NPP and adjacent Environmental Impact Assessment (EIA) Two main alternatives: (1) maximum use of the equipment ordered for Belene NPP project; or (2) entirely new nuclear reactor project! 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Issued by: Bulgarian Nuclear Regulatory Agency 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Feasibility stage Design and construction Decision in Permission Trade principle for use Licence • Council of • National • Minister Ministers Regulatory of • Council of Agency •Energy & Energy • Ministry of Water Ministers Regulatory Regional Commission development Report Decision Operating on merits license 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. A lawsuit for the Atomstroyexport - To be paid and to amount of 1.2 sued NEC for €620 not take any billion euros mln - the cost for actions with it was initiated by the already - To be paid and to Russian side manufactured be sold during 2011 equipment – 2 - To be paid and to after the project nuclear islands be implemented in was canceled a new NPP project 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. -In June 2018, parliament voted to resume the search for investors.; -In May 2019 the government advertised for a strategic investor to participate in the Belene project to build two large reactors, but it said that neither funding guarantees nor long-term electricity sales contracts would be offered; - In August 2019, the energy minister reported that 13 applications for participation had been received, including seven to be a strategic advisor, four to be an electricity customer and/or minority shareholder, and two to be an equipment supplier. KOZLODUY NUCLEAR POWER PLANT - NEW 10/3/2019 BUILDS PLC. - No changes may be made to the safety elements of the design. This is to ensure its licensing; - The owner of the WWER-1000 technology must be involved in obtaining the required licences and permits for the project construction and operation. - The project company must undertake commitments with a supplier of fresh nuclear fuel for the WWER-1000 reactors in accordance with the existing licensing agreements and applicable legislation. - The operator of the built power plant must also be experienced in the operation of VVER-1000 reactors. - The cost of the project construction must not exceed EUR10 billion (USD11 billion) and the commissioning period must be within ten years of signing a shareholders’ agreement. KOZLODUY NUCLEAR POWER PLANT - NEW 10/3/2019 BUILDS PLC. According to the BAS (Bulgarian Academy of Sciences), Bulgaria and the region have a need for 2000 MW of new base power capacity The Belene NPP project is financially viable if: Investment costs - below € 10.5 billion Optimized operational costs Project financing – Debt/Equity ≥ 70/30, interest rate 4,5%; Market Electricity Price - € 68/Mwh ≤ Construction of a new nuclear power plant on the site of Kozloduy NPP with the paid equipment for the terminated project has not been considered The NPP project for newbuild units at the existing NPP site is not cancelled 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. Three options were considered by KNPP-NB - construction of one and two units at the Kozloduy ‘KOZLODUY NUCLEAR POWER PLANT – NEW BUILDS’ PLC NPP site and construction of two units at the Belene site Assumptions: Construction – 10 years, start date Unit 1- 01.01.2019, Unit 2 - 01.01.2020, operation - 60 years, decommissioning - 10 years For result comparing BAS assumptions are used in the three models regarding the exploitation and loading factor of capacities, production, costs of reinvestment and capital repairs, depreciation rate, tax expense, etc. 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. NPP NPP NPP Types of costs € INVESTMENT COSTS, mln BELENE KOZLODUY 7 KOZLODUY 7&8 1&2 Engineering, procurement and construction *** *** *** - Working project *** *** *** - Construction works *** *** *** - Equipment and materials, incl.: *** *** *** Russia, third countries *** *** *** EU supplies *** *** *** - Installation work *** *** *** - Start-up works *** *** *** - Personnel training *** *** *** - Other costs, including: *** *** *** Transport and insurance *** *** *** Insurance *** *** *** Guarantee costs *** *** *** Quality control *** *** *** Management in Russia *** *** *** Vendor's expenditures Vendor's Management of the project *** *** *** Inspection & control *** *** *** Taxes *** *** *** Unforeseen and extraordinary expenses(5%) *** *** *** Total delivery costs *** *** *** Premium for risk and profits (5%) *** *** *** TURNKEY CONTRACT EPC XXXX XXXX XXXX The investment costs of the NPP projects are based on the initial budget of the A - 92 project for Belene NPP (pressurized water reactors, WWER-1000/V466 type). It has been used as a basis for forming an estimated project value to date - max costs 10/3/2019 KOZLODUY NUCLEAR POWER PLANT - NEW BUILDS PLC. NPP NPP NPP Types of € INVESTMENT COSTS, mln KOZLODUY KOZLODUY BELENE costs 7 7&8 1&2 New construction site preparation *** *** *** Nuclear fuel (first charge) *** *** *** Plant connection *** *** *** External physical protection *** *** *** Others *** *** *** Engineering support costs *** *** *** Owner's costs Owner's Total owner's costs XXXX XXXX XXXX Capital