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Interview

with Kirill Komarov, Deputy Director General, International Business Development, Rosatom

18.10.2012 / Energyboardroom

Russia has a rich history in nuclear expertise dating back to the Soviet times. How important is this ‘heritage’ in your current efforts to take Rosatom global?

The history of the nuclear sector in Russia dates back to 1945, which means that we have been developing this sector for 67 years now. We have built up strong expertise during Soviet times, but do not stop there as we continue to develop our capabilities in this area.

Today, Rosatom is one of the biggest global players in this sector in the world. In numbers, we are already the number one in the world in terms of uranium enrichment, with a global share of around 41 percent. As for the construction of nuclear power plants (NPPs), we are also the number one in the world. We have a portfolio of projects to build more than 30 blocks of nuclear power plants in Russia and abroad. Compared to China, this is about 5 blocks more. Moreover, in China these projects are being run by two companies.

In terms of uranium reserves, we moved from the seventh to the second place in just a few years, thanks to our global presence and several assets around the world. If these numbers do not explain the scope of our company, it is worth mentioning that we also own around 20 percent of the uranium reserves of the USA, through our Canadian subsidiary Uranium One Inc. As for nuclear fuel, we are currently number three in the world, owning 20 percent of the world share. To keep up with these numbers, there is obviously still a lot of work to do today.

To carry out this work, we do not only rely on our Soviet heritage, but also build on new technologies. In this regard, we invest 3.5 to 4 percent of our annual revenues into new technologies. This allows us to keep our leadership position in the market.

2011 was indeed a good year. Despite the global economic crisis and despite the Fukushima disaster in Japan, you managed to nearly double the number of overseas orders: from 12 at the start of 2011 to 21 at the end of the year. How do you explain such strong performance from Rosatom, despite this challenging external environment?

These numbers are indeed correct and can be explained as follows. The Fukushima disaster, first of all, did not have a significant impact on nuclear energy worldwide. At a meeting in September 2012 at the International Atomic Energy Agency (IAEA), there was a consensus among all countries taking part in the meeting that the decrease in the construction of NPPs until 2030 has only been impacted by ten percent.

We see that the only countries showing intentions to stop building NPPs, were not very serious about their nuclear plans before the incident in Japan. Germany today, for instance, has about 27% share of nuclear energy, yet did not have any plans to build new nuclear plants before the incident at Fukushima took place. The discussions –before and after Fukushima– have always been about the schedule to close down their NPPs. In Italy, there are no existing plants and there have never been specific plans to move in the direction of constructing new NPPs. As for Japan, we understand that no final decision has been made with regards the closure of their existing NPPs. Despite rumors and public press statements, most intentions spoke of a ‘reduction,’ while no specific decisions have been taken so far.

At the same time, those countries that are the current drivers of global economic growth –India, China, Russia, Southeast Asia, Turkey and the Arab world, Latin America– they have confirmed their plans to build new NPPs. This is a current issue for Europe too, where we see very important projects in the United Kingdom and Central European countries including the Czech Republic, Slovakia and Hungary. Also in France there is a continuous interest in this sector. Another very important event has been the fact that the USA –for the first time in twenty years– has obtained a new license to build a new NPP. This implies that nuclear energy remains relevant and is still an important part of the energy mix to support the needs of humanity.

There are also several explanations as to why Rosatom was so successful in this period. First of all, our NPPs are of the III+ Generation and use the most modern technology. Even before last year’s incident in Japan, our NPPs met all the post-Fukushima requirements. This for example includes all the necessary active and passive security elements. Passive elements are those that work without any human activation and are able to work in critical conditions. In Japan, there was an earthquake and a tsunami and a power cut, but our stations would even be able to work under such critical conditions.

Another important factor is that we do not only build our NPPs abroad but also domestically; this is something our competitors do not do. You cannot go to another country and start building NPPs without showing its reliability on your own territory. We understand that public acceptance for nuclear is essential.

A third key factor is the fact that we can approach the market with truly comprehensive proposals. Rosatom is a unique company owning all technology related to the nuclear sector; from uranium mining to the decommissioning of NPPs. This is especially important for those countries that have only just started developing their nuclear sectors, because we can help them in all the necessary steps to build up their nuclear infrastructure. This goes from the training of personnel, the developing of a legal framework, to answering fuel issues, structural challenges, and so forth. A very important aspect in this regard is the fact that we can provide financing too.

In our world today, the biggest obstacle to building NPPs is not Fukushima but the global crisis. These days it is very hard to find money to finance expensive long-term infrastructure projects. NPPs are definitely a profitable investment, although it is hard to understand this if the return only comes after 20 years. Counting that the life cycle of a NPP is roughly 60 years, during its last 40 years these plants really work as cash machines. At that point, the expense level to produce energy becomes much lower than for gas and coal stations. The issue, however, is how to find the money for these first 20 years.

This is why Rosatom has developed a detailed policy to allow its clients to find help for financing solutions. We now have several tools to address this issue, ranging from intergovernmental credit that Russia is willing to give to countries that want to build NPPs with our designs, to become investors ourselves. In this second instance, we do not only provide the technology but also provide the actual funding to build these NPPs. This is the so-called ‘build-own-operate’(BOO) model, which we have now deployed in Turkey.

Turkey has a very dynamic and developing economy and a high need for electricity. Yet, as they do not yet have the experience in this sector, this BOO solution has become very interesting to them. The conditions that we agreed upon are therefore mutually beneficial for both us and them. Where Turkey provides us with land and guaranteed tariffs, we build the stations with our own funds while we remain in charge of the actual operations too. The guaranteed tariffs represent our guaranteed return. Therefore, our ability to bring modern technologies and find funding for the projects is what allows us to attract contracts worldwide.

The BOO model has now been deployed at the Akkuyu plant in Turkey. What countries have you identified as potential locations where you can replicate this model, and why?

The BOO model can best be implemented in countries that already have high prices for electricity. Without these high prices, it is more difficult to find government support. This support is very necessary, as the construction of NPPs is not only a solution to find electricity, but also essential for the development of the country as a whole. A two-block NPP costs around EUR 8 to 10 billion, and is a great impulse for the development of the country through funding, construction, new jobs, more taxes, and so forth.

Our analysis from the Russian market showed that for every Ruble spent by the Russian government, it gets a return of three Rubles. Our industry also depends a lot on such projects: for every project we do in Russia, 90 percent of the work is being carried out by Russian companies. This has the same effect in countries with higher levels of technological development, such as the United Kingdom and Central Europe. In those very countries, we look at becoming investors or co-investors in the building of NPPs.

At an international level, Russia is often being perceived as a big supplier of natural resources –such as oil, gas and metals– to the world. Russia, however, is not yet really known as a country that exports high-tech competitive products to the international markets. Can nuclear make this change in perception?

This purpose underlies our efforts. The aforementioned numbers and rankings indicate that we are extremely competitive. We work very hard on maintaining our leadership, vis-à-vis other competitors on the market. We definitely believe that nuclear energy can be the sector for Russia to not only export raw materials but also new modern technologies. This position is also being shared by the leadership of our country which reflects in the projects we implement –both domestically and abroad.

The diversification of the energy mix is not only applicable to Russia but to every country worldwide. The dependency on oil and gas is being discussed and readdressed, to take into account future depletion rates. How do you see the long-term role of nuclear energy at a global level?

In Russia, we want to achieve a 30 percent share of nuclear energy within the energy mix. This target can be reached, especially taking into account that we already have regions in the European part of Russia where we reach levels of 30 to 40 percent. As for the global energy mix, I believe that a target share of 20 percent is feasible. In my view, we also have the biggest reserves for the supply of nuclear energy.

It is a fact that oil and gas are becoming increasingly expensive as the oil- and gas fields become increasingly difficult to reach, resulting in more complex extraction processes. As for nuclear energy, we have sufficient supplies to support our planet for centuries. We truly believe that nuclear –as a source of energy– hosts the best conditions with regards to global warming, pollution, and so forth. As a source, nuclear energy remains extremely necessary to humanity; not for 100 percent but as an important part of the energy mix.

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