Nuclear power in the GCC
Joseph Huse talks about going nuclear and finding finance
By Stuart Matthews and Daniel Canty
Jospeh Huse, managing partner of Freshfields’ MENA practice talks to UME about going nuclear and finding finance
With sector experience focused primarily on the power - including nuclear - and oil and gas industries, Dubai-based Joseph Huse, managing partner of Freshfields MENA practice has plenty of experience of infrastructure and energy projects.
Although he describes the last six months of business as a ‘pretty wild rollercoaster’, he is confident about performance over the 2009 fiscal year. Huse says he doesn’t have a crystal ball, but is comfortable that infrastructure related legal work will be pretty strong in the region for 2009 and 2010. The company balances the skill set of its staff with the prevailing conditions with a 50-strong talent pool of lawyers. Travel plays a part too.
“People travel extensively throughout the region depending on where their particular skills are most needed,” he said. “My week started in London, then Paris, to Riyadh for Sunday, Monday back in Dubai, Tuesday in Bahrain, and next Tuesday I have a night flight to Vienna to meet the International Atomic Energy Agency (IAEA).”
The IAEA visit comes at a time when the regional interest in nuclear power generation is reaching new highs and corporate interests are jockeying for position.
“Virtually every country in the Gulf right now has either a nuclear programme in progress, or a nuclear programme under consideration,” said Huse. “We act in this region for both governments and suppliers. There is a GCC Nuclear initiative that has been active for the past four years.
“Saudi Arabia has a programme, Bahrain is actively considering one. Abu Dhabi is in the procurement phase. Oman is considering several options, primarily gas, solar, and even importing coal for power generation.”
“Kuwait and Qatar are both actively considering nuclear power generation programmes. Syria had one – that was blown up, and Iran – everybody is aware of where their programme has reached.”
“Iran is well into the fuel cycle, and they’ve professed to stop making the bomb, but sure as night follows day, if you’ve advanced through the fuel cycle, then enrichment is a very short step to making the bomb, which is why the US is so nervous.”
“From the nuclear perspective the Middle East is an extraordinarily exciting area right now. We are involved in several of these projects. We have absolutely cutting edge expertise in this area. I personally have a very strong background in nuclear.”
It is not an idle boast. Huse acted as council to KEDO, the Korean Peninsula Energy Development Organisation. This was established in 1995 by the US, South Korea, and Japan to implement the 1994 US-North Korea agreed framework. This froze North Korea’s own nuclear power plant development. KEDO’s principal activity was to build a light water reactor nuclear power plant, to replace North Korea’s Magnox reactors.
“KEDO was a programme put in place by the Clinton administration to give North Korea 200MW light water reactors, using South Korean technology,” said Huse. “I drafted and negotiated the US $5 billion light water reactors and helped design the framework regulatory agreements for the projects.”
Steps to go nuclear
Huse says the first step along the way to becoming nuclear powered is to become a member of the IAEA as a nation.
“Then you have to sign up to a series of international treaties,” he said. “The first of these is the Non-Proliferation Treaty – which outlines that the signatory will do everything to avoid the proliferation of nuclear weapons.”
“The signatory state then signs MoUs with potential supplier states, such as Russia, France or the US.”
Huse suggests that a nuclear power checklist start with a projected energy generation demand study and an examination of potential energy sources. Next is the process of joining the international nuclear community through the frameworks and treaties mentioned above. Draft domestic nuclear laws need to be examined and environmental impact studies carried out. There should also be an operational and risk management framework.
“Nuclear is hard for a number of reasons,” said Huse. “First there’s the regulatory regime to get in place. Then you need to find a site. That site then needs licensing. In most developed countries people don’t like to have nuclear power stations in their back garden. The site selection can be very difficult, so what tends to happen is that new nuclear power stations tend to be put next to existing ones.”
The cost of nuclear can be prohibitive and in most cases it takes significant state backing and the ultra long term view that only a government can offer.
“A nuclear power plant is an expensive beast,” said Huse. “The CAPEX on a nuclear power plant is substantially higher than the alternative options. That’s a very topical issue at the moment because the financing of these projects isn’t as easy as it once was. There has never been a project-financing of a nuclear power plant.
“There are two possibilities to financing a nuclear power project in the Middle East: either local government would provide cash-finance, or it could be financed privately, but backed by some sort of government guarantee.
“That should be relatively straightforward for the countries which have a great deal of oil and gas in the region. Abu Dhabi, for example, has an incredible ability to finance projects.”
Freshfields has worked on Al Hidd and Al Durr Independent Water and Power Projects (IWPP) in Bahrain. The project agreements for the development of Al Dur were signed last year by the Bahrain Ministry of Finance.
With an estimated value of more than US $2 billion, the project is the largest of its kind in the Kingdom of Bahrain. It will be located at Al Dur on the south-eastern coast of Bahrain and developed on a BOO (build, own, operate) basis.
The new project will generate a power capacity of 600 MW by June 2010. The remainder of the power plant and the desalination plant will be operational in June 2011, with a capacity of 1,200 MW of power and 48 million imperial gallons per day (MIGD) of water, making the overall capacity of the national network 4,000 MW of power and 191 MIGD.