Finance: France Looks to UK for EPR 2 Financing Ideas

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France may have taught Britain how to run and modernize its reactor fleet, but the UK may now serve as a teacher to France on a topic key to retaining and perhaps even building out France's domestic reactor fleet: namely, attracting private finance to new nuclear construction. With little chance of EDF financing a proposed fleet of six EPR 2 newbuilds from its own balance sheet, French officials are scrambling to develop financing tools that would attract private capital to the effort. And they're looking across the English Channel for inspiration. The French government is more than a year from deciding to move forward with a fleet newbuild project, which would be the largest newbuild program outside of China should the government of President Emmanuel Macron proceed. And there are a host of uncertainties associated with such an endeavor. To begin with are questions surrounding the design of the EPR, from its readiness for development to its licensability. Moreover, with the corporate structure of EDF itself in play, not to mention the reputational damage wreaked by the disastrous Flamanville-3 project in northern France, there are questions about what role the state-owned nuclear operator would play in any further newbuild. "The CapEx needs of EDF are so huge in the current situation that the capacity of EDF's balance sheet to finance new projects is very limited," said Jean Bensaid, head of the Infrastructure Financing Support Mission, or Fin Infra, that advises the French Treasury. "We are desperately looking for investors to invest in the nuclear construction," he continued, speaking to a Jan. 15 session of the International Framework for Nuclear Energy Cooperation's recent workshop on nuclear financing. "We have to make private investors understand that the risk profile of the nuclear energy sector -- especially considering the regulatory framework that we are thinking to implement in the sector -- makes the investments far more interesting and stable than is generally expected." As it staggers to the finish line to complete the over-budget and much-delayed Flamanville-3 EPR, EDF has roughly 1,000 engineers finalizing the EPR 2, and trying to prove that the simplified design will be easier and cheaper to build than the standard EPR (NIW Apr.17'20; NIW Jan.24'20). By the middle of the year EDF plans to submit a file to the Macron government making its case (NIW Oct.16'20). By that time the government may already have decided how it will restructure EDF and a tariff system that will determine its future revenues (related). The EPR 2 technical file will be part of a broader "task force" evaluation of whether new nuclear capacity is needed for France's long-term energy mix, and if so how a fleet of untested large reactors might be financed and built. These are "the main questions that we are dealing with" in a task force comprised of officials from the Macron administration and EDF, said Bensaid. "The idea is to study the construction, the operation, and the regulation of six EPR 2s, which would be built between now and 2040." The task force's report "will be submitted by June 2021," and a decision on whether to proceed with an EPR 2 fleet will be made in 2022. That means the Macron government is slated to sign off on EPR 2s well before any comparable decision on new EPRs in the UK. The government of Boris Johnson hopes to lock in a financing structure for proposed twin EPRs at Sizewell C by 2024, when its current mandate expires (NIW Dec.18'20). Both governments are mulling similar financing tools for newbuilds, although they could end up with very different solutions. Getting It Off the Balance Sheet

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