AUGUST 19, 2020 marked an important milestone for the nuclear industry as Unit-1 of the United Arab Emirate’s nuclear power plant was successfully connected to the grid, a testimony of the nation’s commitment to decarbonise its energy sector.

The UAE became the first nuclear newcomer country in three decades after China’s first nuclear reactor was connected to the grid in 1991, ushering a new dawn for the nuclear industry.

International Finance reported that with its ability to produce nuclear energy, UAE becomes the 33rd peaceful nuclear operating nation to achieve this status.

Citing this as a historic moment for the UAE, H.E Mohamed Al Hammadi, CEO of Emirates Nuclear Energy Corporation (ENEC) said it is the culmination of more than a decade of vision, strategic planning and robust programme management.

Underscoring the great support from the UAE’s leaders for the nation’s Peaceful Nuclear Power Programme (NPP); the UAE Prime Minister and ruler of Dubai Sheikh Mohammed Rashid Al-Maktoum, tweeted “Congratulations on realising this historic achievement in the energy sector, marking this milestone in the roadmap for sustainable development” and Crown Prince of Abu Dhabi Sheikh Mohamed Zayed Al Nahyan, tweeted “We proudly witness the start of Barakah nuclear power plant operations, in alignment with the highest international safety standards.”

This is also a watershed event for the Middle-East as the UAE’s reactor Barakah-1 is the first commercial reactor to begin operations in the Arab world. WNA reported that the UAE plans to export electricity to Gulf neighbours via the regional power grid.

Emirates Nuclear Energy Corporation (ENEC) highlighted that in 2007 the UAE government had conducted an extensive study into the nation’s growing energy demands and electricity generation capacity.

The UAE had projected an escalating electricity demand from 15.5 GWe in 2008 to over 40 GWe in 2020, with natural gas supplies sufficient for only half of this.

Imported coal was dismissed as an option due to environmental and energy security implications. Renewables would be able to supply only 6-7% of the needed power by 2020 and thus subsequently nuclear power emerged as a proven, environmentally promising and commercially competitive option which could make a significant base-load contribution to the UAE’s economy and future energy security.

WNA reported that accordingly, and as recommended by the IAEA, the UAE established a Nuclear Energy Programme Implementation Organisation which in 2009 set up the Emirates Nuclear Energy Corporation (ENEC) as an Abu Dhabi public entity, initially funded with US$100 million (RM416 million), to evaluate and implement nuclear power plants within UAE.

The UAE invited expressions of interest from nine companies for construction of its first nuclear power plant but reduced this to a shortlist of three, comprising Areva, with Suez and Total, proposing its EPR, GE Hitachi proposing its ABWR, and the Korean consortium proposing the APR1400 PWR technology and sought bids by mid-2009. To manage the UAE’s plans for bringing nuclear power to the country, ENEC appointed the global full-service programme management, engineering, construction, and operations firm CH2M Hill.

The KEPCO-led consortium won the contract to provide the UAE  four APR1400 reactors, to be built at its site in Barakah, 300km west to Abu Dhabi city. The WNA highlighted that the value of the contract for the construction, commissioning, and fuel loads for four units was about US$20.4 billion, with a high percentage of the contract being offered under a fixed-price arrangement. The consortium also expects to earn another US$20 billion by jointly operating the reactors for 60 years.

The Advanced Power Reactor 1400 MW (APR-1400), a Generation III+ reactor is an evolutionary advanced light water reactor (ALWR) based on the design of Korea’s Shin Kori 3 and 4 units located in Busan.

In recognition of the importance of international partnership, from 2010 ENEC continued negotiations with the losing bidders, Areva 2  and GE Hitachi, regarding cooperation in related nuclear areas.

Leadership support and financing key for successful introduction of nuclear power

At the recent World Nuclear Association’s (WNA’s ) Strategic e-Forum in September 2020, nuclear leaders dovetailed on the strategic need for strong support from the leader of the country interested to invest in nuclear power as well as available financing, among other factors, as key for the successful introduction and implementation of a nuclear power programme.

Strong leadership support

During the discussions with ENEC CEO His Excellency Mohamed AlHammadi, he had shared that the UAE’s Nuclear Power Programme had started and progressed successfully primarily due to the strong support from the UAE’s visionary leaders who are cognisant of the need for enhanced energy security and in particular to mitigate climate change. It is projected that the four reactors, each APR-1400 producing 1400 MW, together will produce 5,600 MW of power, to meet 25% of the country’s electricity needs at a quarter the cost of that from gas and are expected to prevent the release of 21 million tons of carbon emissions annually.

ENEC and KEPCO Partnership

In 2016, ENEC and KEPCO signed a joint venture agreement establishing a long-term partnership; establishing Nawah Energy Company to operate and maintain the Barakah Nuclear Energy Plant and Barakah One PJSC, an independent subsidiary owned by both companies to manage the commercial interests of the Barakah project and secure project financing from institutional and commercial leaders. ENEC owns 82% stake and KEPCO owns 18% stake in this JV.

Financing the UAE’s nuclear power programme

The UAE’s nuclear power project’s financing for four Generation III+ APR-1400 nuclear power reactors totals US$24.4 billion.

UAE Barakah NPP is an example of a traditional project approach in a regulated market, combining government and vendor finance, loan guarantees and a power purchase agreement (PPA) according to the IAEA’s publication titled Financing Nuclear Power in Evolving Electricity Markets, April 2018.

NS Energy dovetailed that that financial closure for the (US$24.4 billion nuclear power plant was achieved in October 2016 and the project was financed through 80% debt and 20% equity and that the fund will be managed by the subsidiary Barakah One PJSC (Barakah One Company).

Debt financing comprise a US$16.2bn direct loan from the Abu Dhabi government, a US$2.5 billion loan facility from the Export-Import Bank of Korea (KEXIM) and loan agreements of a total of US$250 million from International and National Banks including the National Bank of Abu Dhabi, First Gulf Bank, HSBC, and Standard Chartered. The deal also includes US$4.7 billion worth of equity commitment from ENEC and KEPCO.

The host government, the Abu Dhabi government via the Department of Finance, which is directly financing most (66%) of the project, and provides a sovereign loan guarantee for the remaining finance and a guarantee for the PPA covering the full output of the plant.

Global Trade Review spotlighted that, H.E. Khaldoon Khalifa Al Mubarak, chairman of the ENEC board of directors, commented on the financing facility “With the creation of this financial framework, ENEC will be able to provide safe, reliable electricity to the UAE grid through a commercially viable and cost-competitive programme. This financial structure reflects the world-class quality of the programme, and its credibility in the international community.”

And just recently in late September 2020 during the briefing on the UAE’s Nuclear Power Programme organised by the OECD’s Nuclear Energy Agency, moderated by the Agency’s director-general William Magwood, CEO ENEC, H.E Mohamed Al Hammadi had dovetailed that the UAE’s NPP was structured to be a commercially viable and bankable project which is financed by several banks.

Generally in many cases, countries with interest to introduce nuclear power could not proceed with their plans due to lack of interest from financiers due to the country not being able to promote the NPP as a viable and bankable project.

This is a critical lesson for countries interested in investing in and introducing nuclear power as from the UAE’s experience it is testimony that the nuclear power programme must be structured as a viable and bankable project in order to successfully attract investors to fund and finance the project.

Thus UAE’s prescription for the safe and successful introduction of nuclear power including support from leaders and financiers, amongst other factors, is not only recognised as a model for the region but also globally.

Presently the UAE’s approach serves as the new benchmark for countries interested in exploring nuclear energy for the first time.

Awareness on financing models for nuclear power could be shared with the Malaysian government and financiers for investment opportunities in international nuclear power projects or in preparation of Malaysia’s nuclear power programme, if and when the government decides to consider the nuclear option. – October 7, 2020.

* Sheriffah Noor Khamseah Al-Idid bt Dato Syed Ahmad Idid is a nuclear power advocate.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.