NUCLEAR INVESTMENT BANK | POLICY & FINANCE
Existing risk capital gap Illustrative VaR curve for current nuclear projects Illustrative VaR curve for global market acceptance
Left, figure 2: Illustration of a Typical VaR Curve for a New-Build Nuclear Sector Project Source: IBNI-IO SAG
Time (Months of net capital deployment)
From a financial risk management perspective, the
nuclear sector poses excessive financial risk as it is measured in the form of the Value at Risk (“VaR”) metric. From a financier’s perspective, VaR can be described simply as: the amount of at-risk capital deployed and the probability of loss. Due to the fact that nuclear sector financings are both highly capital intensive and the real and perceived risks of the sector are viewed to be high, it is intuitive that the nuclear sector’s VaR profiles currently compare unfavourably against many other alternative asset classes.
A new nuclear investor The proposed International Bank for Nuclear Infrastructure (IBNI) will be a new multilateral nuclear infrastructure bank that will be focused on enabling nuclear technology to rapidly scale and become both highly affordable and accessible within all its member countries, globally. Importantly, IBNI will finance and support both the production and supply chain (supply side) as well as the customer side (demand side) of the nuclear sector in member countries ranging from developing countries through highly developed ‘nuclear mature’ countries. The bank will act as the global early and long-term patient capital provider and it will finance and support all areas of the nuclear value spectrum on a technology-, vendor-, and country-neutral basis including: new-build (Gen. III/ III+, Gen IV and future fusion, other); life-extensions and re-starts; refinancing and restructurings; fuel cycle (mining through repository); production and supply chains; nuclear infrastructure; and decommissioning and nuclear waste management projects, programs and industries. IBNI will be capitalised, governed and operated using models similar to those that have been proven mission successful by the world’s major global multilateral banks, which have been in existence for many decades. Those models include the World Bank Group (WBG); European Bank for Reconstruction and Development (EBRD); and Asian Development Bank (ADB). In other words, the IBNI will
have an estimated 30+ sovereign governmental member shareholders, each with aligned views on nuclear energy and other global policy objectives. Whereas those existing ‘multilateral development banks’ like the WBG, EBRD and ADB are generally focused on missions such as economic development and poverty eradication (and generally, within defined geographies, developmental and/or income strata), IBNI – as a specialised ‘global nuclear infrastructure bank’ – will have a global mandate to finance and support nuclear sector projects, programmes and industries in all its member countries (not limited to geography, developmental status or income level). The existing multilateral banks are currently not providing any material support for the nuclear sector. While the change in longstanding policies of these institutions toward nuclear is highly encouraged and would be complimentary (not competitive), these institutions are ill-equipped to be seen as a substitute for IBNI’s proposed role as the global nuclear financing institution. On the one hand, the bank will use its own capital to
directly co-finance and support qualified nuclear projects based on the principle of ‘additionality’ (i.e. ‘bridging gaps’ throughout the nuclear value spectrum where existing public and private funding and financing are not adequately accessible on a cost-efficient basis). It is anticipated that the bank’s main commercial operating arm, the IBNI Ordinary Operations Fund will be a self-sustaining entity that will issue long-term debt in the global ‘sovereign and supranational bond markets’. Based on the strong shareholder liquidity and support offered by the bank’s shareholders, it is envisaged that the fund will achieve ‘triple-A’ credit ratings or the highest credit quality that will allow IBNI to borrow funds at the lowest cost and in turn, pass along lowest cost financing for the benefit of the bank’s programme participants. Certainly, accessing least-cost capital is one critical element that will drive down nuclear generation costs and enable nuclear technologies to achieve affordability targets, which are critical for enabling nuclear to scale.
www.neimagazine.com | July 2023 | 39
VaR = Net capital * probability of loss
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