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Energy Nuclear 20 November, 2018 10:00 am   

Will the US co-finance the nuclear in Poland?

Poland has still not decided on the construction of a nuclear power plant. Unexpectedly, the position of the leader in the race for the Polish nuclear was taken by the United States – writes Piotr Stępiński, editor of BiznesAlert.pl.

In the last interview with the WNP.PL portal, the minister of energy Krzysztof Tchórzewski stated that the American offer meets Polish expectations. – From the US side there is a declaration of fulfillment of our main condition, i.e. not only technology and construction of the power plant, but also capital entry, i.e. participation in costs – he stated. As the head of the ministry stressed, “this is a new opening and a completely different perspective than building everything for our own money”.

The words of Minister Tchórzewski are interesting because for the first time he publicly referred to the offer of building a nuclear power plant, presenting its details, even if they remain at the declarative level. So far, the representatives of the Ministry of Energy did not want to reveal specific information.

It is also worth paying attention to the moment when Tchórzewski talks about the offer of the United States. Just two weeks ago, American energy secretary Rick Perry came to Poland with the first visit. The media focused mainly on the long-term contract for the supply of American LNG to our country, signed by PGNiG and Cheniere. Thanks to it, in the years 2019-2042, nearly 40 billion cubic meters of gas will be delivered to the Świnoujście-based LNG terminal. This is an important element of diversification of sources of gas supplies to Poland and reduction of dependence on suppliers from the Eastern dominant until now.

Nuclear cooperation between Poland and the USA

Although LNG and opposition to the construction of the Nord Stream 2 pipeline forced by Russia have dominated Polish-American talks on energy cooperation, much attention was also paid to nuclear energy. During a press conference with Rick Perry, Minister Tchórzewski pointed out that there were several particularly important issues in energy cooperation. Among them, in addition to security of gas supply and cybersecurity of the energy sector, he named nuclear energy. In the joint declaration on enhanced cooperation in the field of energy security signed on November 8, they were listed as special directions of cooperation, among others:

• facilitating cooperation between entities from the nuclear industries of both countries in the scope of construction of nuclear power plants and providing related infrastructure and auxiliary services;

• supporting cooperation of nuclear entities from both countries in search of opportunities to participate in new nuclear projects and providing adequate support for related infrastructure and supporting services as well as ensuring the maintenance of supplies and services for the countries of the region;

• exploring the applicability of financing conditions for nuclear power plants or programs.

In addition, during the meeting with the Government Plenipotentiary for strategic energy infrastructure Piotr Naimski, Secretary Perry pointed out that nuclear power is an element of diversification and building energy security. This confirms the position contained in the joint declaration of September 18 from the meeting of President Andrzej Duda with his counterpart in the US, Donald Trump. It pointed out that both countries will increase their efforts for energy cooperation, including diversification and nuclear energy. Interestingly, a few days earlier, a delegation of the energy ministry headed by the director of the nuclear energy department Józef Sobolewski, who met with representatives of the American administration and the nuclear sector there, visited the United States. At that time, they talked about the possibilities of industrial cooperation between companies from both countries, including the chances of including Polish companies in the global supply chain for the nuclear sector.

Until now, the United States did not seem to be a leader in the fight for the Polish nuclear. According to the commentators, China, South Korea or Japan could become a partner. At the beginning of 2017, a delegation from the Ministry of Energy talked about the Polish nuclear with representatives of the American authorities and the Department of Trade and Energy. At that time, the topic of developing a high-temperature reactor (HTR) was also discussed. The then deputy minister of energy, Andrzej Piotrowski, recalled during his visit to the US that in 2016 a team was set up whose task was to prepare for the implementation of HTR in Poland, regardless of the construction of a nuclear power plant. As the Ministry of Energy pointed out in the communique, the application of this solution on the Vistula would in the future enable a significant reduction in natural gas imports, used as a source of heat in the chemical industry.

No decision

However, despite many meetings, also with other nuclear technology providers, Poland still has not made a final decision on the construction of a nuclear installation. During the 590 Congress ended last week in Rzeszów, in an interview with the Polish Press Agency, the Minister of Energy Krzysztof Tchórzewski announced that an informal decision regarding the nuclear had been made, but the formal one had not yet been made. In other words: the decision on the nuclear has still not been made, as well as the one on energy strategy. The date of announcing the decisions has been repeatedly postponed. According to the current declarations of the Ministry of Energy, by the end of the year we are to know the shape of our energy mix and it will turn out whether nuclear will be in it. Until then, the updated Polish Nuclear Power Program (PPEJ) will also be submitted to the government. There is not much time left until the end of December.

How to finance the nuclear?

The ministry of energy explained the delays in deciding on the future of the nuclear by looking for an appropriate financing model. However, it is difficult to find funds when it is not known whether and how much nuclear power Poland wants. In August last year, Tchórzewski said that by 2040 we should build 4,5 GW for around PLN 80 billion, although earlier it was said that 3 GW would cost PLN 40-60 billion. On the other hand, PPEJ is still in force at 6 GW for PLN 100 billion. There were also estimates of the minister of energy, which shows that by 2040 our country wants to build blocks with a capacity of 4.5-5 GW, which are to cost 70-75 billion PLN. In May representatives of the Ministry of Energy estimated that depending on the capacity of the units (3 000 MW or 4 500 MW), it would cost about PLN 40-70 billion. So far, the energy ministry has argued that Poland can afford an atom. For certain?

Banks are cautious about investing in the energy sector, especially in installations worth more than PLN 40 billion. For investors, the most important is the return on capital, and for financial institutions, the certainty of repayment of loans taken. Similarly for energy companies that would implement plans for the Polish nuclear. These, however, contributed to the rescue of coal and the repolonization of the power plant. Shareholders of PGE EJ1 (a special purpose vehicle responsible for the construction of a nuclear power plant – ed.) are rather reluctant to talk about their involvement in the nuclear project. With 70 percent in it PGE argues that the nuclear remains one of the strategic options, but it pays more attention to investing in CHP and RES. This may be a harbinger of a retreat from a nuclear project and the reduction of emissivity by other means. Let’s not forget that PKN Orlen could also have been planning to participate in the costs of the nuclear. The fuel champion tried not to take an unequivocal position in this matter for a long time, explaining that a possible decision on involvement in the project would depend “on the final shape of legal and financial standards”. Meanwhile, Orlen’s CEO Daniel Obajtek announced last week that in the prepared update of the company’s development strategy “there is no nuclear subject” and he wants to focus on the petrochemical sector, for which he intends to spend over PLN 8 billion. This can also be a clear signal for politicians that Orlen does not want to build a nuclear power plant.

The Polish plan of the current ruling team consisted in acquiring a partner who would provide only technology. Then, it was postulated that he would also get involved in the financing of the project. Then, however, it was decided to build an atom based on its own capital. Since national funds are “limited”, and banks are not favorable to investing billions of zlotys in the energy sector, it looks like the energy department may return to the previous concept. According to Minister Tchórzewski, Americans offer not only technologies, but also capital. For now, however, there is no official offer.

Shortness of nuclear in the USA

Who on the US side would undertake the implementation of the nuclear project in Poland? Earlier, much was said about the Japanese-American Westinghouse concern, but this, after serious financial problems and bankruptcy, was bought by Canadian Business Partners L.P. Interestingly, this is the company’s first investment in the nuclear sector, which surprised the market. It is not known, however, whether Westinghouse, which is struggling with financial problems, will continue its nuclear expansion. It is worth recalling that the company is seeking a contract for the construction of the first nuclear power plant in Saudi Arabia.

Nevertheless, there are several American companies that could be considered as potential partners in the construction of the Polish nuclear, including GE or Duke Energy. The most serious candidate would seem to GE, which has more than 45 reactors around the world. What’s more, along with Hitachi, it runs Global Nuclear Fue, which is responsible for the supply of fuel rods. However, recently, the company has been declining from revenues from the main business segment, and therefore the sale of turbines to gas and coal power plants. In the last quarter revenues from the energy segment dropped by 19%, and total profits by 58%. The situation is also not facilitated by the “shortness” of the American nuclear sector. The Federal Energy Regulatory Commission did not agree to support nuclear power plants in the USA. What’s more, in 2017, the eight oldest nuclear blocks were announced to be closed. Delays and steadily growing project costs in Georgia and South Carolina do not help either.

Poland still has not made a decision on the nuclear, although the energy minister argues that we need nuclear energy, because it will help meet the climate objectives of the European Union and will be a rescue for the coal sector. In order to take advantage of the declared US offer, it is necessary to make decisions at the political level. However, it is not known whether Americans will really want to join the nuclear in Poland, while our domestic energy companies do not want to.



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