Poland picked a technological partner to build an NPP in Pomerania. Now a game to select the right financial model has started, and allegedly there are more potential partners. Regardless of the decisions on subsequent locations, Poles and Americans are getting to work on the first unit – writes Wojciech Jakóbik, editor-in-chief at BiznesAlert.pl.
Government resolution on the atom – a step forward or backward?
The Polish government adopted a resolution on selecting the technological partner for the preferred Lubiatowo-Kopalino location, which is yet to be approved in an environmental impact report, that had been presented last spring. Warsaw does not say plainly whether one partner will build all power plants in Poland, although this would follow from the Polish Nuclear Energy Program (PPEJ). The plan provides for one partner for 6-9 GW of nuclear energy, because such a solution means lower costs and synergy guaranteeing the development of the supply chain and the admission of Polish companies to more and more parts of the project. However, there are signs from Warsaw that it is ready to talk about a second location if the “private” project between Polska Grupa Energetyczna – ZE PAK and the Korean KHNP in Pątnów is successful, which will be verified by the end of the year, and with the French from EDF about a possible third location, perhaps in Bełchatów. Poland wants to have its cake and eat it too, so it has chosen the partner for the big atom, but is still in talks with others. “The nuclear program can always be updated,” says a government source. However, this should be done in advance, so as not to make decisions that are at odds with the documents, but the situation is different when it comes to the future of the game. This can be a form of negotiation, because according to the Polish Nuclear Power Program, the choice of technology can be followed by the choice of the financing model and the distribution of involvement between partners. The Concept Executive Report prepared by Bechtel and Westinghouse is a classified document, but BiznesAlert.pl has learned what it may include: the capital share of both companies up to about 10 percent of the shareholding of Polish Nuclear Power Plants, the level of support from Eximbank from the US, export credit agencies and more. The offer on capital commitment and financing was presented by the Americans, so contrary to what WysokieNapiecie.pl wrote, the Poles did not sign a blank atomic check. The financing model also depends on the chosen technology, so it is a secondary decision that must occur after determining who will build with Poland. The PPEJ calls for a minimum share of the Polish treasury of 51 percent in order to guarantee state control over power plants built with a foreign partner. The greater the share of foreign countries, the lower the costs in Poland. This is why during negotiations, Poland may intimidate the parter of its first NPP with the threat of signing the new contracts with others.
Financing model for Poland’s NPPs – contract for difference or SaHo?
It is possible to include national entities in the shareholding: the largest energy consumers, such as the state, private companies and local governments. In theory, this solution could be of interest to the biggest consumers, such as KGHM or PKN Orlen, if it turns out that SMRs won’t materialize before 2033 when the first NPP built in cooperation with Americans is to be ready. The Poles are considering different funding models, which may depend on further talks with Bechtel and Westinghouse. The contract for difference proposed in the original nuclear program prepared by the government of the Civic Platform and the Polish People’s Party was rejected by the then Energy Minister Krzysztof Tchórzewski back in 2017. Such a model would add a nuclear fee to the energy bill, which has been the subject of public debate recently. Following a solution from Britain, such a fee would finance the difference between the market price and the price guaranteed to the seller of nuclear power. However, it is clear from the Hinkley Point C project that the costs of such a solution passed on to customers can escalate uncontrollably. However, there is another model that is particularly interesting. It was developed by Łukasz Sawicki from the Department of Nuclear Energy at the Climate Ministry and Bożena Horbaczewska, PhD, from Warsaw School of Economics. It was nicknamed the SaHo model in honor of the authors. In this solution the shares of a company, such as PEJ (Polish Nuclear Plants), would be gradually transferred to other entities interested in the energy from a particular power plant. The advantage of this model is that the state would take over part of the responsibility for the project, which would prop up business motives with political ones, and up social acceptance through participation. Unofficially, the cities of Pomerania will gladly accept cheap and stable atomic energy in exchange for a share in a nuclear company. “We are still working on a model for financing the nuclear power plant in Poland. It will aim to offer the lowest possible price of energy to consumers, because this is the goal behind developing the atom,” said Paweł Pytlarczyk, Deputy Director of the Department of Nuclear Energy at the Climate Ministry, during the EUROPOWER 2022 conference. The financing model must be approved by the European Commission, which did not hold back the capacity market supporting coal and the controversial Ostrołęka C Power Plant project in its original version, so the Poles are hoping it won’t block the atom, especially in the face of the energy crisis fueled by Russia, to which one of the answers is reactors as they reduce dependence on Russian gas.
Americans, Koreans and the French – who will build more NPPs in Poland?
It is also known that the Americans would like to free up space in the NPP to, e.g. pension funds, because according to their law Westinghouse cannot be the operator of the power plant, and therefore after its completion would have to evaporate. The US wants to spend about USD 20 billion (about PLN 100 billion at the current exchange rate) on the entire nuclear program, and therefore, in the case of the construction of a 7,200 MW plant, that is, six reactors at two locations, PLN 50 billion per facility, which is half of its rounded costs. Bechtel and Westinghouse have announced a capital injection into Polish atom for the first time in history. 10 percent is less than the 49 percent offered by the KHNP from Korea, but American advocates argue that Asians may offer such a large share and then add more project costs to offset that commitment, as was the case with the APR1400 reactor in the Barakah power plant in the United Arab Emirates. The people who BiznesAlert.pl talked to argued that it was a form of dumping, which has already happened in Poland, e.g. with China’s COVEC, which offered the lowest price, but then failed to fulfill the highway construction contract it had signed. Korean sources, however, argue that they are capable of building on budget and on time. The example from Barakah shows that this is the case, but it does not take into consideration the reality of the EU, which is more challenging than the one in the UAE. Americans and Koreans are tempting Warsaw with the production of nuclear fuel for Poland and the participation of Polish companies in the supply chain. In this regard, Westinghouse has one advantage. It is already replacing Russian nuclear fuel with alternatives in the Czech Republic and Ukraine. It is increasing the potential of the fuel plant in Sweden for the needs of the whole of Central and Eastern Europe, and after the acquisition with the participation of a producer of such uranium fuel from Canada, Cameco (49 percent of WEC shares) will be able to displace the Russians from this area of the nuclear sector. This is important for Poland and the entire European Union. Euratom, cited by BiznesAlert.pl, pointed out that currently it was impossible to impose sanctions against Russia’s Rosatom, precisely because of the West’s dependence on Russian nuclear fuel. Americans can help change that, and they are already doing so. Entering Poland through the Common Services Center in my hometown of Kraków opens the doors to the entire region. The Koreans are hoping for a similar effect. Right now they are in a legal dispute with Americans over their APR1400 reactor, trying to prove that it’s a new solution independent of the American one, which would mean it has to be licensed in Europe. Perhaps a deal is possible, because Westinghouse helped the KHNP at Barakah, and the Koreans could in various ways help the Americans in Poland. For now, however, both parties are holding strong onto their claims – Americans maintain the technology is theirs and this position is supported by the US Energy Department, while Koreans say that they have already “koreanized” it, which they explained on BiznesAlert.pl. The proposal to build an NPP in Pątnów will be verified quickly. Our portal reported that the Koreans will come to talk about the details of the project with PGE and ZE PAK on November 9, to make hay while the sun shines. The talks with the French have not yet been translated into any specifics. The problems the French atom is facing during the energy crisis cast doubt on Poland benefiting from EDF’s offer, which does not exclude the participation of other French companies, for example those supplying and disposing of fuel.
It’s game time! Will Piotr Naimski return to the atom?
The idea of building with two or three partners at once sounds good in theory, because the more gigawatts of atomic energy in Poland, the better. I wrote in July that the government is even talking about 15 GW of nuclear power. However, from an organizational point of view, this would be a challenge that could impact the deadlines. BiznesAlert.pl has already written about the need to share resources that are limited in times of crisis, such as cement. However, it would also be difficult for the regulator – the State Atomic Energy Agency, which had already increased employment and raised salaries to meet the expectations of the original PPEJ, to continue its expansion in case new partners are added to the project. The regulator in Slovenia, which also had affairs with several partners at once, admitted that such a task would be too big. The choice of technology determines the possibility of creating a financial model, as well as the design of construction for a specific location. At this point the preffered location is in Lubiatowo-Kopalino. It should be confirmed soon by an appropriate administrative decision, and then the Climate Ministry promises to work quickly on the choice of the second location, which is expected to take place in 2023. Regardless of how the nuclear affairs with Korea or France end, the first location is prepared for further work that has already been undertaken. The deadline for the first reactor to launch in 2033 is tight, and perhaps Piotr Naimski, the former Government Plenipotentiary for Strategic Energy Infrastructure, could help meet it. He was dismissed from that position due to the disputes over the merger of PKN Orlen and PGNiG. Perhaps he could return to the atom in a new role, for example, as the president of Polish Nuclear Power Plants. “If those who decide, my colleagues in the government, come to the conclusion that I could help this investment, then I will consider it, ” Piotr Naimski said on Polish Radio Trójka when asked if he would take up the post of President of the Polish Nuclear Power Plants. “I ask that the issues of managing this very important investment, which is the construction of the first nuclear power plant in Poland, not be discussed in the media. This matter requires a lot of responsibility,” he said. The comments made by representatives of the Civic Platform and Poland 2050 for BiznesAlert.pl who said that if the government changes, the nuclear projects will be continued, are very promising. Poland is facing parliamentary and local elections, and this is a factor hampering all decision-making. Hopefully it won’t undermine the atom, which has finally moved on.