Large commercial nuclear power plants are essential for Poland to achieve carbon neutrality. As far as I know at this point the Polish government does not believe that SMRs could substitute large scale commercial power plants. KHNP is ready to cooperate with Poland. I am convinced that the two countries can join forces to jointly enter the global SMR reactor market in the future – says Yoh-Shik Nam, executive vice president of Korea Hydro & Nuclear Power (KHNP) in an interview with BiznesAlert.pl.
BiznesAlert.pl: How will the KHNP’s support mechanism work as part of the Polish Nuclear Power Programme?
Yoh-Shik Nam: Bearing in mind that financing is a very important factor in the Polish Nuclear Energy Programme (PPEJ), KHNP has been seriously considering this issue since it decided to submit a proposal to the Polish government.
We presented a financing plan that has various financial solutions. It was developed after many discussions and analyses with a reputable international commercial bank, which we appointed as a financial advisor for the Polish Nuclear Energy Programme. The offer includes such aspects as the optimal ratio of debt to equity (D/E), financial structure, tariff model, technical and financial assumptions and risk allocation matrix.
We have also included references that we received from various state-owned financial institutions, such as K-EXIM (Export-Import Bank of Korea), K-SURE (Korean Trade Insurance Corporation) and KIND (Korea Overseas Infrastructure& Urban Development Corporation), and submitted them to the Polish government.
KHNP plans to finance the Polish Nuclear Energy Programme, which includes the construction of six blocks, by arranging three tranches of financing, each of which includes two blocks, in order to create a competitive tariff and ensure an internal rate of return on equity.
It is expected that the majority of the financing of the 49 percent stake to be owned by Korea will be provided through KHNP capital investments and credit support from Korean state-owned financial institutions, including Korean AKE. If KHNP is chosen as the main contractor for the construction of the Polish nuclear power plant, additional credit support from various international commercial banks will be provided.
Would KHNP become a shareholder of the Polish nuclear power plant?
The Polish government has officially announced that it was looking for a partner who, as a technology supplier, could invest up to 49 percent of its capital in a nuclear project, and KHNP intends to meet these requirements.
KHNP is a large company with total assets of approximately USD 51 billion (KRW 65 trillion) and excellent global credit ratings such as Aa2 (Moody’s), AA (S&P) and AA – (Fitch).
When it comes to the details of capital investments, we are considering different types, such as equity bridging loan (EBL), own capital commitment, shareholder loan and use of proceeds from pre-commissioning (PCR). Depending on the preferences of the Polish government, KHNP can secure additional financial investments from national and international institutions. In view of the above, KHNP has sufficient competence to provide capital financing for the Polish project and is ready to hold further discussions with the Polish government at any time.
What is the Korean government’s support plan?
Korea is one of Poland’s key trading partners. Our countries have been enjoying friendly relations for the past 30 years, since the establishment of diplomatic ties in 1989. Since 2013, when the two countries upgraded ties to a strategic partnership, they have developed closer trade relations.
Korean companies such as Samsung, LG, Hyundai, POSCO and KT have already entered the Polish market and participated in national projects. The Incheon International Airport Corporation has been selected as strategic advisor to the Central Communication Port project.
Over the past five years, the Korean government and KHNP have expressed great interest in participating in the Polish nuclear power plant construction project, while remaining in constant contact with the Polish government.
Over the past five years, the Korean government has pursued an energy transition and sensibly adjusted the share of nuclear energy in the national energy mix. It pursues a policy of energy transition and increasing the share of renewable energy sources, while strongly supporting the export of nuclear technologies.
Thanks to the active support of the government, a new president of Korea was elected in the presidential elections on March 9, and his swearing-in ceremony took place on May 10. The new government has promised to up the generation of nuclear power and to significantly increase support for nuclear technologies export.
One of the government’s main promises is using nuclear energy and renewables to achieve carbon neutrality. In addition, the government has committed itself to support more actively the export of nuclear technologies, for example by setting up a government-wide organization to promote their export. At the same time, cooperation in the small modular reactors (SMRs) sector is expected to expand and revive, as the government promises support for SMR development and exports.
KHNP will continue to actively work for the Polish nuclear power plant project, so that participation in it can lead to strengthening the strategic partnership between Poland and Korea, while supporting the new government’s policy on nuclear technology exports.
The proposal submitted by KHNP includes a cooperation package with active support from the new government. Areas of cooperation include the electricity and nuclear sectors. In particular, the package includes broad cooperation in non-nuclear areas such as medical care and education, as well as technological cooperation in the field of semiconductors and the fourth industrial revolution, which are the main areas of interest of the Polish government.
The introduction of Korean nuclear technology by the United Arab Emirates has contributed to enhanced cooperation between Korea and the UAE and active cooperation in various fields outside the nuclear industry.
Cooperation in the nuclear sector can contribute to a revival in other areas, which should bring synergies for both countries.
KHNP proposed the optimal price for providing 49 percent of the capital financing in a stable manner, in accordance with the requirements of the Polish government, with the active support of the Korean government, while stressing that it is the best partner for the Polish nuclear power plant construction project.
The plan is that that the majority of the financing of the 49 percent stake held by the Korean side will be provided through KHNP capital investments and credit support from Korean state-owned financial institutions, including AKE.
What is KHNP’s view on the possibility of completing the first reactor in 2033?
KHNP proposed an optimal schedule based on its experience from the construction of the APR1400 reactors in Korea and other countries. Given that the Polish government intends to start work on the first reactor, KHNP may complete its construction by 2033, if the project goes according to plan, according to PPEJ.
KHNP is a reliable supplier that has been continuously building new nuclear power plants at home and abroad for 50 years. Although many other projects had significant delays and budget overruns, KHNP, thanks to its rich experience and excellent technology, efficiently and successfully implemented its projects on time and within budget.
In particular, our success in the UAE nuclear power project has demonstrated KHNP’s ability to manage projects in the global nuclear industry. As a result, the 1 and 2 Barakah units have successfully entered commercial operation in April 2021 and March 2022 respectively, and the construction of the remaining blocks is proceeding smoothly and on schedule.
KHNP’s project management capabilities will ensure successful and timely completion of the Polish nuclear power plants.
Are SMRs an alternative?
Large commercial nuclear power plants are essential for Poland to achieve carbon neutrality. As far as I know, at this point the Polish government does not believe that SMRs could substitute large scale commercial power plants. However, based on the PEP2040 update published in March last year, we believe that the Polish government is considering the use of SMR technology in large commercial nuclear power plants and we expect that the SMR industry in Poland will continue to develop.
KHNP is committed to the development of SMR technologies such as SMART (system-integrated modular advanced reactor) and innovative SMR technologies (i-SMR).
For example, KHNP developed SMART and in July 2012 received the world’s first standard design approval (SDA) for SMR reactors. We are currently awaiting an SDA evaluation for an updated version to enhance safety, and our goal is to obtain an SDA by December 2022. In addition to SMART, KHNP is also developing the i-SMR, which is more advanced in terms of security and economics. The innovative SMR reactor is an integral pressurized water reactor with a capacity of 170 MWe. We are committed to its development to complete the licensing process by 2028 and enter the foreign market by 2030.
Based on these experiences in the field of technical development, KHNP is prepared to cooperate in the SMR sector also with Poland. I am convinced that both countries can join forces to enter the global SMR reactor market together in the future.
Interview by Wojciech Jakóbik