ENS NEWS N° 22
Feeling the financial crunch?
Unless you have spent the last few weeks and months orbiting Mars, you can’t have failed to notice that the world seems to be gripped by a state of total panic. The global financial crisis, the looming threat of a major economic recession and increasing pessimism about the future continue to dominate the front pages of the press and most TV and radio news reports. With the value of certain companies and banks being dramatically slashed in a matter of hours and savers showing signs of justifiable neurosis, politicians have been forced to take decisive action to bail out beleaguered financial institutions, guarantee the safety of people’s life savings and restore some semblance of stability and confidence. Traditional economic wisdom has been severely called into question, as has the long term viability of various economic models. Booksellers across Europe have announced a sudden surge in the sales of the Karl Marx classic Das Kapital, as advocates of Marxist economic theory see a chance to grab the spotlight and smugly say “I told you so.”
Well, whatever your take on the current situation and on the causes and possible solutions may be, one thing cannot be denied - that we are experiencing something that is uniquely global in scale and impact. It is a time for cool heads, nerves of steel and carefully calculated strategies for riding out the current storm. The best prepared will, as usual, be the best placed to benefit when the turn-around occurs.
Several friends and family members have asked me how the nuclear industry has reacted to the spectre of economic recession, rising unemployment and declining investor confidence. Of course, it is a perfectly legitimate and relevant question. No sector of the economy, company or individual consumer can remain totally immune to the credit crunch. If they say otherwise they are badly informed, worryingly naïve or simply being economical with the truth.
The current nuclear revival is in full flow. Nuclear energy’s growing security of supply and climate change credentials and its recently-acquired political muscle have led to a fundamental change in policy in some countries and to a gradual but significant increase in public acceptance of nuclear. At a time when things are going well and the future looks rosy it is all the more relevant and necessary to consider whether the current financial crisis will threaten the nuclear resurgence. It’s logical to think that investors might get cold feet and decide not to put their hard-earned cash into a nuclear tomorrow – or at least keep things on hold until the financial climate improves. It would be a bitter irony if, at a time when our industry is experiencing such an upsurge, that external circumstances were to rain on our parade. The question is – and I have to admit that I haven’t done a very good job good in answering those questions so far – is whether such an assumption is accurate or not. That’s one for the experts to answer.
Keen to shed some light on this question, ENS NEWS sought out the views of experts from both the industry and the financial community – those who are in the front line of the nuclear resurgence and those who can bring sanity and clarity to the chaos. Since the UK recently nailed its nuclear new-build colours to the mast, I thought that the British case might be the most interesting one to study closely.
I contacted the Nuclear Industry Association (NIA) in the UK to get a reaction form a utility perspective and then got in touch with Deloitte for an expert assessment from a financial community perspective.
Here is what they had to say.
First up, Keith Parker, Chief Executive of the NIA:
Nuclear power stations are by nature very long-term projects. They take 10 years to plan and construct and will then have an operational life in the region of 60 years. Though the current economic climate is challenging, investors understand that these short-term difficulties can be overcome – and that a nuclear power station will remain a strong investment opportunity going forward.
A key factor in the recent economic turmoil has been the unreliability of fossil fuel prices. Different economic conditions can best be guarded against by a diversity of interests; this way we can see utilities increasingly aiming to diversify their generation portfolio – with many hoping to develop a mix that includes fossil fuel fired generation, renewables and nuclear.
Alastair Srimgeour, a Partner at Deloitte in the UK, and his colleague Kevin Magner, a Project Fiance Director, combined to give the following considered view from a financial expert’s perspective:
Although the impact of the credit crunch is being widely felt, nuclear new build is one area where the impacts are likely to be limited for a number of reasons:
Firstly, the timescale for nuclear new build projects runs well into the future and only planning and preliminary works are in prospect in the near future. This is helpful because it currently looks as though it may be into 2009 before the bank debt market reaches a stable condition less reliant on daily central bank support for funding of many bank loan books.
Secondly, it is likely that nuclear new build in the UK will be driven primarily by large utilities such as EDF, Centrica, E.ON and RWE. These large corporates are in as good a position as most banks to raise funds and better placed than many of the weaker banks. They have the option of accessing the bond market directly to obtain finance rather than borrowing from banks. They have large customer bases, a mix of power station types and do not have the large property exposures and toxic securities found in many banks.
The UK nuclear new build programme may well be affected by higher debt costs for any particular level of credit rating, as debt markets adapt to the new perceptions of risk and its pricing following the events of September-October 2008 and the authorities' responses. However, this is more likely to be an incremental effect than a dramatic one for UK nuclear new build.
In general, other factors such as Government and regulatory policies for the nuclear power industry, public acceptance of the low carbon case for nuclear and the prices of gas and coal as competing fuels are likely to be more significant factors for UK nuclear new build than the credit crunch.
Of course, the situation can differ from country to country and you may disagree with their theses, but their views are pertinent. So, judge for yourselves whether what they say is relevant to your situation. I would welcome you views on the subject and be delighted to share them with readers in the next edition of ENS NEWS.
ENS NEWS N° 22 kicks off in traditional fashion with its Word from the President piece. On this occasion David Bonser focuses readers’ attention on the issue of opportunity and responsibility, so often the two sides of the same coin. His thoughts on the subject are outlined in a keynote speech that he gave at the 2008 International Youth Nuclear Congress, in Interlaken, Switzerland.
The connection between the nuclear industry and today’s financial situation is then put firmly in the analytical spotlight by Andrew Teller in his usual thought-provoking report.
The ENS Events section provides detailed analysis and appreciation of two of the Society’s most important and stalwart international conferences – PIME 2009 and RRFM.
Next up, in the Member Societies and Corporate Members section are a number of reports from Belgium, Slovakia, Serbia, Lithuania, the Netherlands and Russia that reflect the broad geographical spread of ESN’s membership. Among the subjects and events discussed are an international conference on secure energy supplies in Slovakia, a report on a new NPP construction project in Lithuania, an important milestone reached in the history of nuclear-generated electricity in the Netherlands and training and education opportunities offered by our Belgian colleagues from SCK-CEN.
The Young Generation Network section of ENS NEWS N° 22 provides two personal appreciations of recent events –the European Nuclear Young Generation Forum, that took place recently in Cordoba, Spain, and the successful return of TopSafe, which drew many ENS members and other delegates to Dubrovnik, Croatia.
It has been a busy period on the EU institutions front and the eponymous section of this quarter’s publication is news about two major events organised by FORATOM in October to highlight the priorities and implementation of EU nuclear energy policy: a Seminar on Public Opinion and a seminar entitled Paving the Way to Europe’s Low-Carbon Energy Future. Both events attracted a series of top-level speakers, senior EC officials (including none other than EC President José Manuel Barroso), MEPs, industry representatives, the media and various stakeholders involved in the process and progress of EU nuclear energy policy. The issue of increasing public acceptance of nuclear energy among the EU’s citizens and that of promoting the crucial aims of Europe’s future low-carbon energy status are of fundamental importance to all sections of the nuclear community.
The ENS World News section features an article on nanofibers as their potential as a means of storing radioactive waste and a couple of news stories from NucNet.
Finally, ENS NEWS gives advanced information on PIME 2009 and RRFM 2009.
Enjoy ENS NEWS N° 22!
Editor-in-Chief, ENS NEWS