2008 05 13 goldman sachs pwr & utility conf

8/14/2019 2008 05 13 Goldman Sachs Pwr & Utility Conf

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Global Nuclear Power

Goldman Sachs

Eighth Annual Power and Utility Conference

13 May 2008


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2 Eighth Annual Power and Utility Conference

These slides do not provide a complete record of thepresentation and discussion.

The views expressed in this presentation are mine;these views may not be the same as those held by

CRAs clients or by others at CRA.


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Four historical nuclear power regions


4/344 Eighth Annual Power and Utility Conference

Five regions with new nuclear power plans



Russia

In 2007, Rosatom pulled together all parts of the nuclear industry

Centralized control and government involvement

Large internal build programme and strong push for exports

Increasing move to Western safety practices and partners First floating nuclear

power plant underconstruction

Building nuclearplants in Iran, China,Bulgaria and India

In talks with othercountries



China

State ownershipand control ofelectricity sector

Large capacitybuild with majorrole for nuclear

Localization is

key strategy Several nuclear

fleets

Aggressive

moves to secureuranium


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India

Existing units mostly PHWR

Goals

20,000 MWe by 2020

25% of electricity from nuclear by2050

Outside NPT due to weapons

Excluded from civil nuclear trade;new deal with US still on hold

Developing nuclear fuel cycle touse large thorium reserves

Russian PWRs at Kudankulam tomeet near-term demand

Kudankulam


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North Africa and Middle East

Proposed Planned Under construction


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Source: Washington Post, 12 May 2008


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South Africa

Policy that half of newbaseload capacity willbe nuclear

20,000 MW by 2025 Global warming, over-

dependence on coal

Nuclear 1 is up forBoard Approval in June

2008 3,400 MW

EPC contract in 2008

Operational by 2016

Nuclear Fleet to follow PBMR is long-term

option


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World view of new nuclear

Electricity without fossil fuel or emissions Energy independence (e.g., France, Japan, Korea)

More petroleum products for export (e.g., Middle East)

Clean and carbon-free (e.g., Scandinavia and US)

Not lowest cost resource without carbon credits High capital costs offset by stable and low energy costs

Upward pressure on electricity prices to recover capital investment

Easier for government utilities and government economies

Vendor/design competition for world market share

Only a handful of new designs under construction; fewer inoperation

Buyers selecting designs now, before real outcomes known


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Nuclear power plant design

International vendors competing for market share

New designs have high cost; may present risks

Most operatingcommercial

power reactors

Early Prototypes

Generation IGeneration II

1950 2000 2005 2010 2020

Generation IV

Advanced LWRs

with evolutionarydesigns

Generation III+ Near-Term Build

Generation III+

20151995

Industry moving toward standardized power plants

Pre-approved & proven designs at multiple sites

Replicate nuclear fleet approach in France and US nuclear navy


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Nuclear fleet concept

Sequentialbuild

Eskom?

Coordinatedconstructionprocess

Learning curvebenefits capturedby multiple partiesin process

Mobilization ofbuild teams, ifsequence iscoordinated well

Multipleidentical

units

Multipleunits

Single unit

France

Commonsimulators, specialtools, training

Co-ordination ofupgrades,maintenance,

Fungibleoperators,maintenanceteams, outageteams

Operationalimprovementthrough learningacross fleet

US fleet

operatorsFleet composed ofmixed designs,vendors, vintages

Organizational andmanagementscope benefits

Overhead

Purchasing

In-house expertise

US single unit

ownersNo fleet

Few benefits

US stylemanagement

companies formedto compensate

Some ability toshare learningthrough industrygroups

Planning flexibility

Bulkpurchase

France in 70s

& 80sCoordinatedconstructionprocess

Learning curvebenefits capturedat multiple levels

Upstreaminfrastructurethrough largeorders

Mobilization ofbuild teams;moving from oneunit to the next


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Nuclear fleet strategy linked to industry

structure

Owne

rship

Govt

None

Regulated

IOU

Merchant

Electricity Markets Total

US vertically

integrated IOUs

US merchantnuclear

companies

RussiaChina

Francein 75


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Source: CRA analysis

2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000

In operation Under construction EPC contractCOL filed (US) Design selected (US) New Player (US)

Who is winning the global nuclear design race?

?

?

?

?

?

?


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2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Haiyang TVA (Bellefonte)

Ga Pwr (Vogtle)Duke (Lee)

SCE&G(Summer)

Progress (Harris)

FP&L (Turkey Point)

Progress (Levy County)

Sanmen

AP1000 Toshiba/Westinghouse


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US Evolutionary Power Reactor - AREVA


2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Olkiluoto 3 (Finland)Flamanville 3 (EdF)

Constellation (Nine Mile Point)Ameren (Callaway)

PP&L (Susquehanna)

Taishan Alternate Energy (Idaho)Amarillo Power

Constellation(Calvert Cliffs)


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Advanced Boiling Water Reactor GE Hitachi


2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Kashiwazaki Kariwa 6 & 7

Hamaoka 5Shika 2

Shimane 3

Lungmen 1 & 2

NRG & CPS(South Texas Project)

+


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AES-91/92 VVER (Gidropress)


2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Tianwan 1 & 2 BushehrBelene 1 & 2

Kudankulam 1 & 2


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2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Dominion (North Anna)Entergy (Grand Gulf)

Entergy (River Bend)Exelon (Texas)

Economic Simplified Boiling Water Reactor

GE Hitachi


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2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


Luminant/TXU

(Comanche Peak)

US Advanced Pressurized Water Reactor -

Mitsubishi Nuclear Energy Systems


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Race has just started


2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


+


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Not much activity without US units


2 5

3

2

2

2

2

2

2

1

10

2

3

3

4

4

3

0 2 4 6 8 10 12 14 16 18 20

APWR

ESBWR

AES-91/92

ABWR

EPR

AP1000


+


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COL application and approval;3-4 year process, ~$90 million

US first wave projects

Major expenditures for equipmentprocurement and construction

Final NRC review/hearing, ITAAC; fuel load,startup and testing; commercial operation

0 1 2 3 4 5 6 7 8 9

Design and engineering;NRC Design Certification

-1-2

Financial commitment;execute EPC contracts

Procure long-lead components; sortregulatory/market/financing issues;negotiate EPC contracts


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New nuclear plant designs may be risky

Little hard information available now

New construction approaches

TVO lessons Modular construction how & who & where?

Technical issues (some may lead to COL delay)

Digital I&C generic issue for all designs Cable connectors (modular construction)

Very large turbine generators

Operational performance New round of latent defects?

French N4 experience


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2,000 2,500 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500

$/kW

TVA (AP1000, '08)

EdF (EPR, '07)

China (EPR, '07)

NRG (ABWR, '08)

TVO (EPR, '05)

S&P ('07)

FP&L (AP1000, '07)Progress FL (AP1000, '08)

Moody's ('07)

Ga Pwr (AP1000, '08)


New nuclear plants will be expensive


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A new generation of nuclear power plants is on the drawing boardsin the U.S., but the projected cost is causing some sticker shock:$5 billion to $12 billion a plant, double to quadruple earlier rough estimates.

New Wave of Nuclear Plants Faces High Costs

May 12, 2008

By REBECCA SMITHMay 12, 2008; Page B1


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Nuclear plant risk over time

N

RC

T

echnical

Financial

COL Commercialoperation

Now


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Nuclear project risk mitigation

Technical Design Certification process; international build/operation

EPC contracts with delay penalties; Vendor performance guarantees

Nuclear Regulatory NRC one-part combined Construction and Operating license

Financial

Revenue certainty - merchant andregulated plants

Keep options open; exits and off-ramps in contracts

Investment large; 10% or more of market cap for US electric utilities

Government role in financing; DOE loan guarantees are US equivalent

Overall Avoid or manage early mover risk


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Nuclear power development

Realinformationabout cost,performance of

new nucleardesigns

US initial wave ofCOL DC filings(well afterselection ofdesign/vendor)

First COL approvals US first waveplants begin

operation

US first waveplants start

construction

Middle East,North Africanuclearprogrammes

Eskom(SouthAfrica)vendor

selection

Ontariovendor

selection

China,Finland& EdF

building

US & globalsecond wavedevelopment

20102008 2020

OlkiluotoEPR unit

operational

EskomNuclear 1units beginoperation

ChineseAP1000 &EPR unitsoperational

OntarioPower newunitsoperational

Flamanville

EdF EPR unitoperational

2015

Nuclear Spin


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Nuclear Spin

Pro-Nuclear Anti-Nuclear

Capital costsThe past is over, lessons

were learned; nuclear lookscompetitive

Doomed to repeat past costoverruns and delays;

Olkiluoto EPR is proof

Operating costs Excellent experience;lowest fuel costs ever High uranium prices not yetin nuclear fuel costs

Weapons use National policy issue Nuclear power = nuclearweapons

Safety High levels of safetyTMI, Chernobyl, close

calls

PerformanceExcellent recent

performance; best everLong outages; issues with

some new units in 90s

Nuclear CO2 Carbon-free energy High life-cycle C02emissions

Spent fuelCurrent approach is fine; 50

years with no problemNeed million-year solutionbefore building new plants


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Whats my spin?

Nuclear capacity essential to control carbon emissions

Nuclear is good technology . . .. . . but expensive to build, operate and maintain

Large investment decisions need more than spin

Investor economic outcomes are key

Identify and resolve issues & risks

Optimism is good; realism is better


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Edward Kee

Vice PresidentCRA International

1201 F Street, NW

Washington, DC 20004(202) 662-3953

[email protected]

2008 05 13 goldman sachs pwr & utility conf

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