Managing risks in nuclear new-build projects: how to strike the right balance

26 May 2016

Risk is a major issue on any large construction project. However on nuclear projects risk is an even bigger issue, reflecting the capital-intensive nature, long construction periods, and wide array of associated risks ranging from financial to environmental.

The risk landscape for nuclear new-build is changing fast. With the move away from Government financing and towards private sector equity and commercial debt, project financiers are looking to de-risk projects (as much as possible) by pushing risks down through the supply chain.

This isn’t always easy. While the supply chain can absorb some risk, there’s a limit to how much it can realistically take and in any event, any risk will simply be added to the bottom line.

As a result, there’s a fine balance to be struck between financiers wanting to de-risk their lending (with their growing indirect influence over everything from project structures and organisational design to procurement strategies) and the supply chain pushing back.

So, how do we balance these perspectives?

Valuable lessons can be learned from alternative structures that have succeeded in the past, such as collaborative “alliances” where risks are shared much more across the project participants.

In my view there is a place for such alternative structures. However every nuclear project is unique, with a different combination of regulators, countries, government involvement, financiers and even financial structures involved each time. The particular circumstances surrounding the project will also have to be taken into account.  

Overall, I think the key to striking the right balance around risks is clear: getting everybody’s agendas onto the table – and then creating incentives that inspire all parties to take nuclear new-build projects on as part of their own business. That’s the goal we all need to aim for.

For more on this topic, click on this short video where I speak to Maxine Symington from Gowlings LG.

Fiona Reilly | Director
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