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Platts 8th Annual European Nuclear Power 2013

Procurement for New Nuclear Programs

27 June 2013

Warsaw, Poland

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Procurement for New Nuclear Programs

• Nuclear power programs – risk and opportunity

• Supplier Selection – it’s not really about technology

• Scope – not what the customer should worry about

• Cost – not to be confused with price

• Funding – a deal breaker or deal maker

• The need for a Commercial Strategy

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Lightbridge Corporation

Nuclear

Fuel

Technology

Advisory

Services

New design for LWRs

• More power

• Less spent fuel

• Improved safety

• Versatile design options

Full scale lead test

assembly in PWR

~ 2018

Nuclear New Build

Generation Services

Regulatory Services

• Technical

• Commercial

• Regulatory

• Management

• Legal

• Political

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1 2 3 4 5

Risk and Opportunity in Nuclear Power Programs

Program Work Scope

Turnkey NPP Supply

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IAEA Contract Date

IAEA

Conventional

Innovative Innovative

-5 -4 -3 -2 -1

Conventional

Major opportunity in early phases

New Build Schedule

Risk includes owner’s responsibilities

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Supplier Selection

• Detailed technology evaluations provide limited benefit

– Gen III/III+ designs on offer now will produce electricity with comparable reliability and will exceed generally accepted safety goals.

• Use reference plants

– Very limited design changes

• No single supplier can provide turnkey

– Suppliers must form teams

• Projects rarely fail because of technology or design

– Implementation is key

• Most important to focus selection on the team / your future partner

– Team strength and commitment is critical

• Intelligent Customer: know yourself

– Conduct a skills gap analysis

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Configuration Control

Acceptance Scheduling

• Owner’s responsibilities

– Infrastructure

– Licensing and permits

– Training and manpower

• IAEA guidelines

– should be cross checked, improved,

but not obeyed

Interface Specification

Owner’s

Responsibilities

Supplier

Responsibilities

Scope…what’s important

Program

Requirements

Regulations,

Guidance &

Obligations

∆ Reference

Plant

• Requirements vs. Scope

– Requirements are customer focused

– Requirements spec enhances bid assessment and delivery verification

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Requirements Specification Example

Program

Goal

Safety Quality Security Schedule Cost Regulation Localization Technology Training

Advanced Proven Licensed

Detailed

Requirement

Acceptance

Test

Capacity Commitment Capability

Detailed

Requirement

Acceptance

Test

Requirement

Breakdown Structure

Customer defines levels 1 down to 2 or 3;

Supplier defines further down to detailed

requirement with acceptance tests

L1

L2 examples

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Cost…what customer’s can impact

• Nuclear power is an oligopoly

– Price is determined more by market dynamics than by actual cost of the facility

– Market dynamics change rapidly from buyers to sellers markets

– Intelligent Customer can create favorable conditions

• Customer decisions impact program cost

• Risk ultimately rests with the customer

Scope based

Requirements based

Single source

Multiple bid competitive

Fixed Price

Target Price, Incentives

Turnkey

Separate Suppliers

Supplier Insurances

Owner Insurance (OCIP)

EPC only

Equity Partnership

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Funding…a deal breaker or deal maker

• Large capital expenditure (>20bnUSD)

before revenues begin

• Few utility owners have such large

resources available

• Project financing by investors alone

does not work

– High risks

– Long duration / exposure

• Need government funding or debt

guarantees

• Potential for supplier government

support or equity participation

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• Focus on maximum long term value, not initial price

• Need up front thinking – fuel, support services,

– training,

– commissioning

– operations,

– waste management, and

– decommissioning

• Need an integrated commercial strategy – procurement process

– evaluation criteria

– contract type

– harmonize incentives

Commercial Strategy

– contract scope

– risk & opportunity

assessment

– funding plan

Manufacturing

and construction Production costs

(O&M plus fuel)

Major refurbishment

(e.g. steam generator

replacement)

Decommissioning

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Summary

• Know what you need and define success.

• Map your authorities and manage stakeholders and interfaces

• Manage risks & opportunities with long term view

• Integrate overall program together with top level, wholly inclusive risk

and opportunities register

• Don’t expect to save time, or recover time in construction, but there

are many opportunities up front

• Study and understand successful programs: supplier teams and

customers

• Know yourself – conduct skills gaps analysis (no need to share the

results!)

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Questions?

Ltbridge.com

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Lightbridge Corporation – Business Segments

Advisory Services Business

Nuclear Regulation

• Leading regulatory

team from

international

agencies

• Advisory services on

design, development

and management of

nuclear energy

programs according

to highest standards

Nuclear Generation

• Industry leading team

from international

technology & fuel

suppliers, utilities, and

government agencies

• Provide strategies

with comprehensive

plans for new or

expanding nuclear

programs

Metallic Fuel Technology

Versatile Fuel Design

• Applicable to all

water-cooled reactors

• Plutonium disposition

from civil and legacy

weapons sources

Improved

Economics

• 10-17% power

uprate and longer

fuel cycles in

existing reactors

• 30% or greater

power uprate in new

build reactors

Enhanced Safety

• Key Safety

Improvements vs.

existing fuels

• Accident tolerant

fuel design

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Service Offerings

Comprehensive support throughout the nuclear power lifecycle

• Specialization in emerging civil nuclear programs

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