Managing nuclear

Managing nuclear new build risks

When building a nuclear power plant, it is almost a case of when – not if – a dispute will arise. Understanding the risks is key to mitigating them, say partners at White & Case T he nuclear industry has proven fertile ground for commercial disputes. Few industry sectors face sterner regulatory oversight or greater technical complexity. Lost expertise and knowledge gap During the nuclear industry’s heyday, from the 1960s to the 1980s, countries such as the US, France and the UK developed deep and institutional expertise in nuclear planning and construction. Much of that skill base has costs. With a simpler design than larger reactors, and a shorter construction phase of 19–24 months, SMRs have become increasingly popular globally. The construction of SMR fi rst-of-a-kind designs presents both technological and

Nuclear power is a highly sophisticated since been lost, with many equipment and licensing risks, but once units are built using industry in which projects are prone to cost service suppliers exiting the industry. By the proven designs, these risks will be reduced. overruns and delays. Of the 441 reactors in early 2000s, only a relatively limited supply Further, although the risk is arguably lower operation around the world, only two were chain to support renewed interest in NPP than for larger reactors with longer completed on budget and on time. construction remained, with many leading construction times, SMRs remain complex

Understanding dispute risks inherent in experts long past retirement age. and costly projects, susceptible to delays and new nuclear power plant (NPP) projects This left many countries with established cost overruns. goes a long way in helping all involved to expertise in operating and decommissioning manage these disputes when they arise. nuclear plants, but a shortage of know-how Nuclear power is here to stay in the planning and construction phase – Despite the numerous challenges the Why disputes occur adding signifi cant risk. This skills gap industry faces, nuclear power will remain There is intense scrutiny of all aspects of extends to the wider support industries, a key source of energy for decades to come. nuclear plant construction from both safety including legal and fi nancing expertise. Given the signifi cant risks inherent in any and security perspectives. Reactor suppliers, new nuclear project, mitigating these risk contractors and day-to-day operations are Designs on nuclear factors from the outset should be a key watched by the nuclear regulator in a fashion One of the most important stages of any consideration for all involved. that is unrivalled in other construction NNP project is the design and planning The greater the understanding of the projects, and tension between regulator, phase. The more detailed and prescriptive issues that could arise, and the earlier owner and supplier is ever-present. the documentation is at this stage, and the these issues are understood, the less likely

But even projects that face no obstacles more precise the wording in the contract, they are to evolve into disputes – or at least can take the best part of a decade to get from the greater the chance of avoiding delays and the better prepared those involved will be conception to operation, historically disruptions throughout the entire project. to manage those disputes. This foresight averaging at least eight years to complete. Some designers believe that small could go a long way to reducing the

Overruns are the norm, and with this modular reactors (SMRs), made using signifi cant cost increases and extended comes disputes about who is responsible standardised factory-manufactured parts construction schedules that currently and for how much. Given the nature of the delivered ready for assembly, may challenge the industry. industry and the costs involved, these off er lower investment risk and disputes – costly aff airs themselves – tend By Andrew McDougall QC, Daniel to be played out in a very public way and Garton, Richard Hill, Kirsten often take a very long time to resolve. Odynski and Dipen Sabharwal QC,

Licensing risks

Licensing risk is one of the critical areas for new nuclear projects and this often generates headlines due to their politically sensitive nature. An initial license to develop a new plant may be required, followed by a construction license, followed by licenses to permit the transportation of nuclear fuel, and fi nally an operational license to run the plant. Every one of these steps creates an environment for delays and cost overruns. Partners, White & Case