Government, business leaders seek innovative finance structures to advance nuclear power

There is wide agreement among world leaders and large companies that nuclear power will be needed to help meet climate goals, but financing new nuclear power projects remains risky, government and corporate officials said Sept. 23.

Finding ways to reduce that risk with public and private capital, various bond structures, and other products is garnering lots of industry attention, those officials said at an event held to coincide with Climate Week NYC.

Countries that have endorsed the “Declaration to Triple Nuclear Energy,” introduced at COP28 in 2023, were accompanied by 14 financial institutions expressing support for the call to triple global nuclear energy capacity by 2050, according to a statement.

“One thing is crystal clear, the climate crisis—the hurricanes, wildfires, the heat waves, floods, and droughts that come with it—have arrived at our doorstep,” John Podesta, senior adviser to the president for international climate policy, said at the event. “It’s clear that we have to use every zero-carbon tool available … and we’re here today because nuclear energy, quite frankly, is one of those important tools, alongside other energy technologies such as wind, solar, hydroelectric, carbon capture utilization and storage,” he said.

Financial institutions supporting the effort are Abu Dhabi Commercial Bank, Ares Management, Bank of America, Barclays, BNP Paribas, Brookfield, Citi, Credit Agricole CIB, Goldman Sachs, Guggenheim Securities, Morgan Stanley, Rothschild & Co., Segra Capital Management, and Société Générale.

Renewable energy project investments are similar to investing in the stock market, while nuclear power investment is more like investing in long-term bonds, said Slovenia's prime minister, Robert Golob. “We have to adapt the financial instruments, and that is why it is so important to get the financial industry on board.”

Both renewables and nuclear power are needed, Golob said. He added that renewables can be built fast and while nuclear power cannot be built as fast, it can offer a power price that is largely stable for 60 years.

Ebba Busch, Sweden's Minister for Energy, Business and Industry and Deputy Prime Minister, said she is looking to take politics out of energy and put physics back in.

The Swedish government is reviewing a nuclear financing proposal based on cheap state loans that can lower financial costs and reduce risk, an electricity price hedging agreement or contract for differences to provide future power price security, and a risk-sharing mechanism that gives investors a minimum return on equity.

The aim is to create a new financial framework that enables industry to invest in new-build nuclear projects and attract private investment, Busch said.

From the customer side, Benjamin Pickett, vice president and general manager of public affairs and government relations at steelmaker Nucor, said the company’s electric arc furnaces use a lot of power and nuclear-powered steel mills could help meet global climate goals. “Demand for energy infrastructure has never been this great, but it can fail without financing,” he said.

Financial challenges, potential solutions

Financial solutions that can help spur nuclear power development will vary depending on what is being addressed, like using the right products for recommissioned plants, small modular reactors, or supporting the supply chain for things like finding uranium, said Jason Rekate, global head of corporate banking at Citi.

“The biggest problem that we still face is the long tenor and the potential for cost overruns, and that’s the biggest thing that makes it difficult for investors to get behind nuclear investment at this point,” Rekate said. “You’re going to need differentiation by tenor and credit risk.”

Financial institutions are increasingly seeing nuclear as an interesting asset class, a step change from just two or three years ago, said Severine Mateo, global head of the low carbon transition group at BNP Paribas.

Asked if government support is always needed or if private banks can finance nuclear projects on their own, Mateo said government support could be targeted to specifics like contracts for difference, but some form of government support is still needed.

Export credit agencies are another form of growing support and, “at the end of the day, it is all about creating hybrid-financing structures,” she said, adding that green bonds could also work for nuclear financing.

Guaranteed long-term high price contracts for power could be another key to locking in nuclear project finance, according to James Schaefer, senior managing director at Guggenheim Securities. Without power purchase agreements or regulated structures, it will be hard to finance new nuclear technology, he said.

Gayle Miller, senior adviser in the global client group at Brookfield, said, “we need to be aware that construction companies and financial players need to allocate risk in new ways. It would be great to see if we can look to an insurance product as well,” she added.