POLICY & FINANCE | NUCLEAR INVESTMENT BANK
Right, figure 3: Illustrations of Targeted ‘Flattening’ of Nuclear Sector Project VaR Curves Source: IBNI-IO SAG
Existing risk capital gap
Illustrative VaR curve for current nuclear projects Illustrative VaR curve for global market acceptance
3 years post-IBNI 5 years post-IBNI 7 years post-IBNI
10 years post-IBNI (Steady state)
Time (Months of net capital deployment)
On the other hand, and most importantly, where the
bank aims to achieve the most significant global impacts will be in catalysing a highly significant ‘capital multiplier impact’, which represents the total quantum of global financial markets capital mobilised relative to each dollar of public investment (by sovereign shareholder member states) in the bank. IBNI’s advisory team projects that the bank should reasonably target a ‘capital multiplier impact’ of more than 100x, from the bank’s targeted establishment date in 2024/25 through 2050. Accordingly, the potential for the highly significant ‘capital multiplier impact’ effect targeted by IBNI will provide the highest value for money for each public dollar invested. Thus, a comparative investment in the bank would represent the most efficient means of achieving both national and global policy objectives, relative to strictly inward investments in a countries own nuclear sector’s domestic and bilateral initiatives (which the bank would not compete with).
Managing nuclear risk In order to accomplish the bank’s core mission of scaling nuclear to attain a sustainable 2050 Net Zero World, IBNI will need to enable multidimensional risk mitigation solutions that will rapidly and sufficiently reduce nuclear sector VaR profiles to levels that become acceptable and in-line with other similar infrastructure asset classes. IBNI will implement programmes and offer customised
financial product lines that will be engineered to systemically and progressively ‘flatten’ the VaR curves all across the nuclear sector. This ambition goes well beyond the necessary goal of developing market confidence through the necessary demonstration of global fleet deployments of serialised, repeatable, successful nuclear projects delivered within schedule and budget. IBNI will also serve as a global aggregator of an adopted set of universal nuclear-specific standards and criteria and the bank will aim to become a global institutional repository of nuclear financing expertise, which will become relied upon by investors, lenders and financing institutions for their
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own evaluation of nuclear sector financing transactions. Borrowing from the World Bank’s phraseology, IBNI will become the ‘Gold Standard’ of nuclear finance. While currently there are discrete elements of nuclear-specific financing standards and expertise available (from the International Atomic Energy Agency, Organisation of Economic Cooperation and Development, and Equator Principles IV, International Finance Corporation Standards, for example), there is, by no means, the necessary comprehensive set of nuclear-specific financing standards and criteria, such as those that pertain to every other asset class which are available from the existing major multilateral financing institutions like the World Bank. Nuclear is a very unique asset class that deserves its own global financial institution that would have the deep expertise within the sector and understanding of the unique multidimensional risk elements of nuclear finance. Such an institution would be able to adopt a set of standards and criteria specific to these unique elements. Without an IBNI, and despite the valiant combined
efforts of individual governments, sporadic international cooperation and the nuclear industry itself, the nuclear sector’s ability to scale will most likely continue to be constrained and the ‘vicious circle’ will persist unbroken. IBNI offers a unique ‘whole of the world’ proposition that will enable the global nuclear sector to rapidly and efficiently break the ‘vicious circle’ that persistently plagues the sector. Only through a global and systemic approach toward mitigating nuclear’s multidimensional risk elements and sufficiently ‘flattening’ the nuclear sector’s VaR curves can the sector’s ‘vicious circle’ be transformed into a ‘virtuous circle’. IBNI offers this unique global risk mitigation solution which will enable the mobilisation of trillions of dollars of global capital necessary for the nuclear sector to scale in the near-term. ■
Further information on the IBNI initiative can be found at
www.nuclearbank-io-sag.org. The author can be contacted at
d.dean@
nuclearbank-io-sag.org
VaR = Net capital * probability of loss
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