Several factors led to more than 14 years of delay in the construction and the final project cost was €11bn, triple the initial cost. The supplier, Areva, had to bear most of these budget overruns. Hinkely Point C was based on a variable price contract. Although the goal was to complete the first unit by the end of 2025 it has now been delayed to 2030 as a result of multiple factors, including the COVID-19 pandemic. At the same time the project cost, which was estimated at £18bn (€21bn) is now expected to reach £34 bn (€40bn). The contract structure minimises the risk of cost increases for EDF, but the UK government is faced with budget management issues and electricity prices might increase as a result. It is clear then that for large-scale and long-term projects with huge uncertainties like nuclear builds, the interests of suppliers and owners surrounding the fixed and variable price contracts are bound to be in conflict.


Seeking a solution at Cernavoda The refurbishment project of Cernavoda unit 1 pursued by Romania’s Societatea Nationala Nuclearelectrica S.A. (SNN) serves as an alternative model that attempts to solve this potential conflict of interest. This project is based on a cooperative model which encompasses conflicting interests. The project valued at €1.9 bn is a large-scale


refurbishment project which includes engineering, procurement and construction. It also includes the construction of infrastructure such as a radioactive waste storage facility. The goal is to extend the unit’s operational life by 30 years. The owner, SNN, negotiated with Candu Energy and


Ansaldo Nucleare, the original suppliers of Cernavoda unit 1, based on a fixed price contract but these negotiations ultimately reached deadlock. At this point Korea Hydro & Nuclear Power Co., Ltd. (KHNP) joined the project, proposing to execute the construction on a fixed price basis and making it possible to balance the proportions of fixed and variable prices. This led to mutual concessions by SNN and various suppliers and provided new momentum for contract negotiations. As a fixed price construction contract was made possible,


accounting for one-third of the entire EPC costs, both Candu Energy and Ansaldo Nucleare were able to reduce the risk of fixed prices on the total project cost. As a result, the two companies could secure SNN concessions in adopting a variable price contract for procurement (including project management) that includes high risks caused by external factors. At the same time, SNN accepted the fixed price contract for design/engineering where the suppliers have advantages, thus making risk management relatively easier. It was also a favourable outcome for SNN that engineering


and construction would be based on fixed price contracts, considering the additional goal of signing contract in a timely manner. Consequently, KHNP’s involvement enabled the


balance of variable prices (for procurement and project management) and fixed prices (for engineering and construction) in the contract, providing both the owner and suppliers with justification and practical benefits. KHNP was able to participate on a fixed price basis, as it is not just a supplier of nuclear power plants but also an operator. It thus has capabilities to estimate costs and the optimal construction period based on its experience gained from numerous nuclear power plant construction and refurbishment projects as well as the accumulated data for over 40 years of operation and maintenance from the same position as a utility owner. KHNP was also confident of responding to unexpected events during construction based on its certified supply chains and the refurbishment of the Wolsong unit 1, the same model as is found at Cernavoda. With KHNP’s participation, it was possible to form a


tripartite consortium which combined individual expertise with Candu Energy, the IP holder of Cernavoda nuclear power plant, and Ansaldo Nucleare, which supplied the balance of plant during Cernavoda’s construction. The key takeaway from the Cernavoda unit 1 project is that suppliers able to establish a consortium that could effectively share project risks allowed them to reach a contract with a balance between fixed and variable prices. It created a solution which satisfied all the owners and suppliers. As this project shows, when a nuclear project becomes


large-scale and complex, a single company struggles to bear all the risks. Thus, a consortium or a joint venture model where each party takes responsibility for its own specialised area and works together can be an effective solution. The participation of a company that can bring together the capabilities of each partner and fill any gaps which may exists is essential in such a project model. In the example of the Cernavoda unit 1 project KHNP’s expertise provides a good solution for suppliers who have the original technology for specific reactor models but are looking for reliable partners in the field of project management and construction. In this complicated environment, multiple parties of


interest can reduce uncertainties and expand opportunities by leveraging their own strengths and working hand in hand. Furthermore, once this cooperative model takes hold by going beyond mere competition among suppliers and focusing on mutual growth, the perennial challenges of risk can be turned into new opportunities for the nuclear industry. ■


www.neimagazine.com | April 2025 | 21


Above left: It was possible to form a tripartite consortium which combined individual expertise from Candu Energy, Ansaldo Nucleare and KHNP at Cernavoda Source: Ansaldo Nucleare


Above right: Large and complex nuclear construction projects can make risk management challenging Source: Sarens


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