NP Project Financing in China

Qinghua ZhangWorkshop on Economics and Financing of

Nuclear PowerFeb. 09 - 11, 2009, Vienna

1. Brief Introduction

NP Organization and Personal experience

Nuclear Power Authorities

Ministry of Land and Resources /State Oceanic Administration

General Administration of Customs State Administration of Foreign Exchange

NEA

NDRC MOF

NNSA

State CouncilMOEP

PSAR&FSARProject Proposal

State-owned Assets Supervision and

Administration CommissionSASAC

China National Nuclear Corporation, CNNC

China Guangdong Nuclear Power Co, CGNPC

China Power Investment Company, CPI

Nuclear Power Major investors

45% share

10% share

100% share

100% share

45% local Power company

China National Nuclear Corporation, CNNC

NP Utilities

NF Utilities

R&D Inst.

Qinshan Nuclear Power Company,100%Qinshan Nuclear Power JV Company,50%Third Qinshan NPC,51%Jangsu NPC,50%Sanmen(51%), Fuqing(50%), Taohuajiang(50%), Hainan(51%) NPCsChina NP Engineering Company,100%NPIC, RINPO

NP experience� 1982 -1989, China Atomic Energy Research Institute,

Experimental Nuclear Physics� 1989 – 1995, China Nuclear Industry Economics

Research Institute, NP and Energy Planning and Economic Analysis.� 1995 – 2005, NP planning and project pre-preparation

management, Division Director, planning department of CNNC� 1999 – 2006, Director of the Board, NPQJVC

(Qinshan II) and TQNPC (Qinshan III), respectively.

Self Introduction

Self IntroductionNP experience� 2002 – 2005, Assistant President, Zhejiang Sanmen NP

project preparation office.� 2005.04 – 2008.08, VP of Sanmen Nuclear Power

Company(SMNPC), responsible for financing and contracting.� 2008.09 – present, Deputy Director, NP department of

CNNC, responsible for project planning, financing and contracting.

NI Contracting, 2005.09

Sanmen site 200809

Self IntroductionIAEA activities participated� Fellowship sponsored by IAEA TC programm1992.09 – 1992.12, Nuclear power economics analysis, KAERI, Korea 1992.12 – 1993.03, Energy system planning, ECN, Netherland� 1993 – 2001, China coordinator, IAEA RCA NP

programm in Asia � 1995.11, Consultancy meeting of software

BIDEVAL-3 (TRS 396), Vienna� 2008.10.21, Consultancy meeting to maintain and

operate the Nuclear Economic Performance Information System (NEPIS) , Vienna

2. NP Plants in Operation

6 plants, 11 units, 9GW installed

NP Development of China

300MW/1991300MW/1991300MW/1991300MW/1991

2x600MW/2002/20042x600MW/2002/20042x600MW/2002/20042x600MW/2002/2004

2x700MW/2002/20032x700MW/2002/20032x700MW/2002/20032x700MW/2002/2003

2X900MW/1993/19942X900MW/1993/19942X900MW/1993/19942X900MW/1993/1994

2X984MW/2002/20022X984MW/2002/20022X984MW/2002/20022X984MW/2002/2002

2X1000MW/2006/20062X1000MW/2006/20062X1000MW/2006/20062X1000MW/2006/2006

By the end of 2007 ，，，，

there are 11 reactors operating with capacity 9100MWe，，，，1.27% of the whole country.

Commercial Operation

9068119068Total2003-1-8 2002-9-14 1997-11-28 2002-5-28 2002-2-26 1997-5-15 198022×990CGNP

CGuangdongLing'ao I1994-5-5 1994-2-7 1988-4-7 1994-2-1 1993-8-31 1987-8-7 196822×984CGNP

CGuangdongDaya Bay39483948CGNPC

2007-8-16 2007-5-14 2000-9-20 2007-5-17 2006-5-12 1999-10-20 212022×1060CNNCJiangsuTianwan I2003-7-24 2003-6-12 1998-9-25 2002-12-31 2002-11-19 1998-6-8 140022×700CNNCZhejiangQinshan III2004-5-3 2004-3-11 1997-3-24 2002-4-15 2002-2-6 1996-6-2 130022×650CNNCZhejiangQianshan

II

1994-4-1 1991-12-15 1985-3-1 30011×300CNNCZhejiangQinshan I51205120CNNC

Date of Commercial Operating

Date of First Connection to

the GridFCD

Nominal Power MW(e)

Unit No.

Panned Nominal

Power MW(e)OwnedProvinceNPP Name

Unit Capability Factor

6868.0Tianwan1

87.493.086.496.382.376.290.4QS-III 1

79.579.5Tianwan2

88.787.097.586.779.692.8QS-III 2

86.686.588.388.7882.8QS-II 275.985.764.155.490.680.279.7QS-II 190.995.282.291.88799.889.1QS 188.487.792.491.280.490.4Ling'ao 285.183.290.183.188.580.7Ling'ao 185.488.899.879.773.984.7Daya Bay289.991.280.399.9587.790.1Daya Bay1Avg.200820072006200520042003%

Electricity Production

254.99140.75100.1814.06Tianwan 1&23342.9379628.6548.5530.9504.7438.0Total

627.79112.38115.4114.5101.2105.378.84Qinshan III506.3599.588982.8101.387.3746.17Qianshan II148.0526.2422.1724.8323.5527.1724.09Qinshan I

739.4147.4156.9150.2145.8138.9Ling'ao I753154155155139150Daya Bay

Total200820072006200520042003100M kwhr

Qinshan-I CNP300 PWR

CNP300 C1&C2, PAKISTAN

Qinshan-II 1&2 CNP600 PWR

Qinshan-III 1&2 CANDU6

Tianwan-I 1&2 VVER900

Dayabay & Lingao 4x980MW,M310

3. NP Projects under Construction & Planned16 units, 16 GW under const.Units planned >30 GW

NP Development of China

HongyanheHongyanheHongyanheHongyanhe

1000X4 MW1000X4 MW1000X4 MW1000X4 MW

HaiyangHaiyangHaiyangHaiyang

1250X4 MW1250X4 MW1250X4 MW1250X4 MW

Qinshan II ext.Qinshan II ext.Qinshan II ext.Qinshan II ext.

650x2 MW650x2 MW650x2 MW650x2 MW

Qinshan I extQinshan I extQinshan I extQinshan I ext

1000X2 MW1000X2 MW1000X2 MW1000X2 MW

SanmenSanmenSanmenSanmen

1250X4 MW1250X4 MW1250X4 MW1250X4 MW

FuqingFuqingFuqingFuqing

1000X6 MW1000X6 MW1000X6 MW1000X6 MW

NingdeNingdeNingdeNingde

1000X4 MW1000X4 MW1000X4 MW1000X4 MW

YangjiangYangjiangYangjiangYangjiang

1000x6 MW1000x6 MW1000x6 MW1000x6 MW

LingLingLingLing’ao IIao IIao IIao II

1000X2 MW1000X2 MW1000X2 MW1000X2 MW

TaohuajiangTaohuajiangTaohuajiangTaohuajiang

1000x4 MW1000x4 MW1000x4 MW1000x4 MW

HainanHainanHainanHainan

650X2 MW650X2 MW650X2 MW650X2 MW

By the year 2020, it will reach 40GWe

Planned & Under Construction

M310＋602013-11-12008-12-122×1080CNNCZhejiangFangjiangshan 602014-9-12009-10-1

M310＋582015-7-12010-10-124×1080CNNCHunanTaohuajiang 582016-5-12011-8-1

AP1000562013-11-312009-3-3126×1250CNNCZhejiangSanmen 562014-09-312010-1-31

562015-2-12010-7-1 AP1000562014-4-12009-9-3126×1250CPIShandongHaiyang

602014-7-12009-8-1 M310＋602013-10-12008-11-126×1080CNNCFujianFuqing

602012-1-12007-2-1 CNP600602011-3-12006-4-122×650CNNCZhejiangHaiyan

Qinshan II Extension

Reactor Type

Construction Pioriod (Months)

Expected date of CODFCD

started No.

Planned MW(e)OwnedprovinceNPP Name

Reactor Type

Construction Pioriod (Months)

Expected date of CODFCDstarted

unitsPlanned MW(e)OwnedprovinceNPP Name

562016-7-12011-12-1562015-12-12011-5-1562015-5-12010-10-1562014-10-12010-3-1562014-3-12009-8-1

CPR1000

562013-8-12008-12-1

26×1080CGNPCYang

jiangYangjiang

602015-8-12010-9-1602014-10-12009-11-1602013-12-12009-1-1 CPR1000

602013-1-12008-2-1

26×1080CGNPCFujianNingde

602014-6-12009-11-1602013-8-12009-1-1602012-12-12008-3-1 CPR1000

602012-5-12007-8-1

46×1080CGNPCLiaoningHongyanhe

602011-1-12006-2-1 CPR1000602010-3-12005-4-122×1080CGNPCGuang

dongLing'ao II

Planned & Under Construction

Qinshan-1 expansion 2x1000MW

Sanmen 6x1250 MW AP1000Sanmen 6x1250 MW AP1000

AP1000 unit 1 NI base

20081014

AP1000 Unit-1 FCD 20090318

200812

NP Development of China

300MW/1991300MW/1991300MW/1991300MW/1991

2x600MW/2002/20042x600MW/2002/20042x600MW/2002/20042x600MW/2002/2004

2x700MW/2002/20032x700MW/2002/20032x700MW/2002/20032x700MW/2002/2003

2X900MW/1993/19942X900MW/1993/19942X900MW/1993/19942X900MW/1993/1994

2X984MW/2002/20022X984MW/2002/20022X984MW/2002/20022X984MW/2002/2002

2X1000MW/2006/20062X1000MW/2006/20062X1000MW/2006/20062X1000MW/2006/2006

红岩河红岩河红岩河红岩河

HongyanheHongyanheHongyanheHongyanhe

海阳海阳海阳海阳

HaiyangHaiyangHaiyangHaiyang

秦山二期扩建秦山二期扩建秦山二期扩建秦山二期扩建

Qinshan II ext.Qinshan II ext.Qinshan II ext.Qinshan II ext.

三门三门三门三门

SanmenSanmenSanmenSanmen

福清福清福清福清

FuqingFuqingFuqingFuqing

宁德宁德宁德宁德

NingdeNingdeNingdeNingde

阳江阳江阳江阳江

YangjiangYangjiangYangjiangYangjiang

岭澳二期岭澳二期岭澳二期岭澳二期

LingLingLingLing’ao IIao IIao IIao II

桃花江桃花江桃花江桃花江

TaohuajiangTaohuajiangTaohuajiangTaohuajiang

海南海南海南海南

HainanHainanHainanHainan

By the end of 2007 ，，，，

there are 11 reactors operating with capacity 9100MWe，，，，1.27% of the whole country.

By the year 2020, it will reach 40GWe

Long term PlanningBy 2020, total NP capacity installed will be reached more than 55GWe, which is 37% more than the target of 40GWe in China“11th 5-year plan” .In the China“12th 5-year plan” , it is planning to have 70 GWe NP capacity installed sharing 5% of national total power capacity, and 30 GWe under construction by end of 2020.

4. General Financing Arrangementsfor NP Projects in PR. China

National Special Policiesfor NP Project Financing

The Equity from the investors should not be less than 20% of the total project budget.

During the start up period, the equity could be about 10% as a kind of favorable condition.The SDB provide the soft loan for the equity

80% project budget can be financed from commercial loans and Export Credit.

The domestic commercial banks could provide long term RMB loan with 5-7yr grace period and 10-15yr repayment schedule.

National Special Policiesfor NP Project Financing cnt.

The NP company is encouraged to offer the long term bond and stock in the market specially for the NP projectsNP company can apply for Customs Duty and related VAT free for imputing new technology equipment and special materials, which can not be localized or provided by domestic manufacturers.The NP companies are allowed to have lower depreciation rate corresponding to the long repayment schedule.Base loading for all operation units

Dayabay 2x980MW projectTurnkey project: Framatom as MC, 198708-199405Equity: 10% of the total project budget

Sponsored by Shareholders of JVC,Mainland 75%, HongKong 25%

Loan: 90% of the total project budget85%Export credit and 15%Commercial loan provided by bank syndicate from the equip. and service exported countries.

Domestic commercial bank provided RMB loan for local civil works and owner’s scope.

Qinshan-III CANDU project Turnkey project: AECL as MC, 199806-200307Equity: 3.4% of the total project budget

5 Shareholders: CNNC 51%, 49%shared by 4 local power companies.SDB provided soft loan in RMB for CNNC’s share.

Loan: 96.6% budget with 100% foreign financing85%Export credit and 15%Commercial loan provided by bank syndicateState Development Bank(SDB) as the direct lender for NP company.

Lease financing for heavy water during 20yr operation

Tianwan VVER projectIsland Contract: NI + CI, ASE of Russia as MC

199910 - 200811Equity: 9.4% of the total project budget

3 Shareholders: CNNC 50%, local 50%Loan: 90.6% of the total project budget

100% government loan with favorable interest rate for Russia scope, domestic commercial loan for IDC85% Export credit, 15% commercial loan for other foreign supplierDomestic commercial loan for the local civil works and owner’s scope.

Sanmen AP1000 projectIsland/Component Contract: 200903 - 201409

NI EPC contract : WEC(Key Equip., Engineering, PM, TT), SNPTC as MCCI equip.&desig contract: HPEC/MHI, MHI/ESEPDBOP: owner scope

Equity: 20% of the total project budget5 Shareholders: CNNC 51%

Loan: 80% of the total project budget100% domestic banks provide foreign currency and RMB loan.Invite 9 banks to bid for leading bank of foreign currency and RMB loan respectively.Key factors: interest rate, grace period, repayment conditions (schedule, refinancing, prepayment), financing services.

5. The Capital Investment for typical NP Project

Main PrinciplesThe structure of capital investment cost much depends on the policies and roles of purchaser's company or country. Such policy and roles are different from country to country, even from company to company.In China, such as Dayabay, Qinshan-III, Tianwan and Sanmen project, we used the IAEA accounting system as a biding quotations and check lists to evaluate the price of foreign suppliers.Power project accounting system is used for domestic suppliers and owner’s scope.

Main Principles cnt.The Completion Cost (budget at project completion)

Fixed Cost + IDCsFixed CostOvernight Cost + Escalation/Inflation IDCs: Interests During Construction,

financing fees, foreign exchange loose, etc

Capital Cost = Completion Cost/CapacityRMB or USD/KW, constant at year of FCD

Contract cost Firm&Fixed costBase price + Escalation/Inflation(t)

2x1000MW class project budget cash flow

during the construction

7.7%7.7%7.7%7.7%

12.6%12.6%12.6%12.6%

19.6%19.6%19.6%19.6%

20.2%20.2%20.2%20.2%

16.4%16.4%16.4%16.4%

15.0%15.0%15.0%15.0%

8.5%8.5%8.5%8.5%

0%0%0%0%

5%5%5%5%

10%10%10%10%

15%15%15%15%

20%20%20%20%

25%25%25%25%

1st1st1st1st 2nd2nd2nd2nd 3rd3rd3rd3rd 4th4th4th4th 5th5th5th5th 6th6th6th6th 7th7th7th7th

Annual BudgetAnnual BudgetAnnual BudgetAnnual Budget

FCD OF UNIT1 COD OF

UNIT2

PWR 2x1000MW class project

100Completion Cost12.3IDCs

87.7Fixed Cost1.0Escalation86.7100Overnight Cost

5.76.6Contingency19.823.0Owner’s fee4.75.4Initial NF(2/3)10.311.9BOP14.616.8Conventional Island29.634.0Nuclear Island2.02.3Site preparation

Note CompletionOvernight%

Civil works 15.1%Equipment 44.2%Erection 11.3%Other 29.4%

% CW Equip. ErectNI 11.0 68.9 20.1CI 13.2 70.9 15.9

BOP 59.2 27.5 13.3

54.2 26.819.0

ConclusionOvernight cost reduction

2 units at one site or lump sum procurement,4 units or sets -10%,6 units or sets -15%

Capital costNew tech/prov tech: 1.2 – 1.30Cost(600MW,65% L)/Cost(1000MW): 0.7Cost(600MW,80% L)/Cost(1000MW,80% L): 0.8

Foreign exchang risk ( loose or benefit)Dayabay 5% , 1994Qinshan-III 3%, 2003

6. Generation Cost for typical NP Project

PWR 2x1000MW plant generation cost

80024.4Staff salary22.2Consumables

53.4Outage expense

100Total13.9Financial fee

Spare part incld.

2.6OthersLife time2.5DecommissionLife time12.1Spent fuel

18.2O&M5%/yr26.0Depreciation1/325.7NF reload

%Net output: 94%LF: 80%Discount rate: 8%FIRR=IR(longterm )+ (1 - 2%)

7. The Experience and Conclusions

It is suggested to have Turnkey, BOT or BOO approch for the country with small Elc. Grid or lack of industrial infrastructure, NPP management and labor force.Although it is expected that new reactor designs will reduce capital costs and construction time of NPPs, total investment costs of nuclear units are expected remain high in new or first built site or courtiers. The capital cost of first built NP plant, with one or two units at one site will be rather higher than multiple unites or package procurementThe foreign suppliers with the Export Credit proposal are highly expected.

Lower interest rate and long repayment schedule will be favorable financial conditions for NPPRisk management of foreign exchange rates and loan interest rates are so important to control the project budget and repayment cash.The economic level of capital investment much depends on the economic situation of the country.

IAEA TRS Guide Books can be the “Bible” for the first built NP project, such as

TRS 217Guidebook on the Introduction of NPPTRS 279Nuclear Power Project ManagementTRS 275,Bid Invitation of Specification for NPPTRS 204Technical Evaluation of Bids for NPPTRS 396,Economic Evaluation of Bids for NPP

Zhang QinghuaDeputy DirectorDepartment of Nuclear Power, CNNCP.O.BOX 2102-21, 100822Tel: +86-10-68555517Fax: +86-10-68531694Email: zhangqh@cnnc.com.cn