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PROJECT RISK MANAGEMENT KEY TO NEW NUCLEAR CONSTRUCTION
Washington, May 13, 2010 — The U.S. government's support as loan guarantor for selected lead projects is helping accelerate construction of the next generation of U.S. nuclear power plants. However, the number of guarantees currently available is small compared with the numerous proposed projects as the Department of Energy conducts sophisticated project risk analysis to allocate its support for maximum effect, according to Dan McGarvey, leader of the U.S. Utility and Nuclear Practice of Marsh.
Mr. McGarvey spoke at the U.S.-Japan Roundtable on Nuclear Energy Cooperation presented in Washington last week as part of the Howard Baker Forum series. The law firm of Baker Donelson Bearman Caldwell & Berkowitz sponsors this ongoing series; and Marsh's Japan Client Services practice served as a co-sponsor for this event.
Keynote speakers included U.S. Senators James Webb of Virginia and Lamar Alexander of Tennessee, former Senator and Ambassador to Japan Howard Baker and Akira Omoto, Commissioner of the Japan Atomic Energy Commission. Former Senator Pete Domenici of New Mexico also attended the event. Speakers representing Marsh and other operating companies of Marsh & McLennan Companies, Inc. (MMC) led key discussions during the roundtable.
Mr. McGarvey, who moderated the panel on Financing the American Nuclear Renaissance, emphasized the importance of Department of Energy loan guarantees in jumpstarting new nuclear construction in the U.S.
"Global bankers accept that the technology behind generation III reactor designs is well established and economically competitive. They also recognize the extraordinary safety and reliability record of the U.S. nuclear industry and the proven capabilities of the EPC contractors leading construction efforts," he said. "Nonetheless, the sheer capital investment required would create financing challenges in the current credit environment were it not for the participation of the U.S. government as loan guarantor."
He noted that preliminary DOE selections support proven technology at existing nuclear facilities, and that the guarantees require both the payment of fees and significant equity participation of project sponsors.
Glenn George, Ph.D., an economist with NERA, provided an overview of the risk issues being evaluated by the Department of Energy in conjunction with loan guarantee applications. Dr. George has served as a DOE consultant for all four short-listed loan applications for new nuclear projects as well as numerous other alternative energy proposals.
"In the context of potential loan guarantees for new nuclear projects, relevant potential sources of risk and uncertainty include technology and project management risk, power market risk, regulatory risk, and ultimately the level of public support for the project," said Dr. George, whose role is to identify and model risk scenarios that might affect a project's success.
During the session, Earl Long, Assistant Treasurer for the Southern Company, discussed the company's experience as the first utility to complete an application. Southern Company has received a term sheet from the DOE for its two-unit proposed expansion at the Vogtle nuclear plant near Augusta, Georgia. Other panel members included Yoshiaki Usijima, Chief Washington Representative, the Japan Bank of International Cooperation; Kohei Okada, Director General for Nippon Export and Investment Insurance, and Leslie Kass, a Senior Director with the Nuclear Energy Institute.
Richard Duncan, leader of Marsh's mid-Atlantic region, opened the luncheon presentation which featured an address by Karen Harbert, CEO of the U.S. Chamber of Commerce’s Institute for 21st Century Energy.
Mr. Duncan said, "MMC companies are supporting the rebirth of America's nuclear energy industry across the board, from Mercer's role in helping clients attract and retain the talent needed to build these plants, to Marsh and Guy Carpenter's role in designing and facilitating insurance and risk transfer programs, to Oliver Wyman’s role in helping design shorter outage durations through improved supply chain strategies."
About Marsh
Marsh has over 23,000 employees and provides advice and transactional capabilities to clients in over 100 countries. Marsh is a unit of Marsh & McLennan Companies (MMC), a global professional services firm with approximately 52,000 employees and annual revenue of $11 billion. MMC also is the parent company of Guy Carpenter, the risk and reinsurance specialist; Kroll, the risk consulting firm; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman, the management consultancy. MMC's stock (ticker symbol: MMC) is listed on the New York, Chicago and London stock exchanges. MMC's Web Site is www.mmc.com.
Media Contacts
Al Modugno
212-345-2448
Anand Poola
212-345-4292
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