And also one thing that has come up over and over again throughout the course of these two days is looking at how we derisk new projects, and that, as I was reminded, is both the reactor projects and also fuel projects. So to moderate our next session on financial derisking of new nuclear projects, I am delighted to introduce Nana Ayansu who is a non-resident senior fellow with the Atlantic Council Global Energy Center. Please come on up and welcome to the panel as well.
All right. Good. Good afternoon, everyone. How's everyone doing, by the way? First of all, just want to say a big thank you to everyone and big thank you to Jennifer and the whole team. Actually, why don't we give Jennifer and their whole team a huge round of applause for putting on yet another great event. So thank you all as well for attending. You know, before we start, I wanted to start with just a short reflection on this topic which I think is so important and so critical in this moment. I think it's evident, you know, from the past couple days, even more so from the past several years, there's no shortage of enthusiasm and capital and cool ideas and cool technologies and so on that are around nuclear. I think it's one of probably one of the most exciting times in the industry. But to me, if you think about how do we really achieve liftoff and catalyze development, this moment is a bit less about that. In an environment where we're all confronting really difficult questions around affordability, around speed, around energy security, around emissions, around competition for capital, success in this moment is really going to be predicated on how well we can build trust and how well we can build confidence with all stakeholders to go forward. So can project stakeholders really trust and rely on each other to deliver on their components? Can consumers and ratepayers count on prices of projects coming in where they're to be expected? Can utilities and grid planners be confident that the capacity that they sign up for will arrive when it's expected in order to ensure that there's resource adequacy? Can investors feel confident that the rug won't be pulled out from under them? And can taxpayers, of course, at the end of the day, be assured that their hard-earned money and resources are being put to good use? And I believe the answer can be yes, but it's not automatic. Really, in this moment, building a new playbook, writing a new playbook that's centered around trust and assurance and everything that all of us do in this moment should really be predicated on how we can instill even greater confidence to deliver, not just transferring risk but really working to eliminate risks at their source. So with that, super excited for this discussion. We have an amazing set of panelists for which we can get tactical and unpack some of these questions. So we have Seth Grae who's the CEO of Lightbridge, Vas Kuchinad who's the managing director of origination at Bank of America's sustainable finance group, and Jeff Wilson who's the chief strategy officer for the US Export-Import Bank. So first of all, thank you all very much for making the time to join. Let me start with a couple questions. So maybe Seth, I'll start with you. When it comes to fuel, but also when it comes to workforce and other parts of the nuclear supply chain, you have this big chicken and egg problem. Can you build the supply chain ahead of demand or should you wait for the demand to see that? So there's a large amount of demand risk that can exist which is compounded by it's not just a matter of how much, for instance in your case like fuel, you might need but also what types of fuel you might need across these different reactors. So I was just wondering whether you could share a little bit about how you all at Lightbridge and of course within the broader sector are working to get your investors comfortable with that demand risk.
Yeah, it's a great issue and we really view the nuclear industry as being in two types of companies. There's the utilities that produce the power and there's the suppliers. And the utilities are the big dogs because if they need something, they will pull it through the supply chains or do the best they can to do it. But if you're a supplier and the utility doesn't want it, it doesn't matter how much you make, you're not going to sell any. Now, some companies are trying to be companies that will build, own and operate on their own, but that doesn't exist yet. And I think some may succeed in that. But so at Lightbridge, we start with the utilities. The company started by talking to major nuclear utilities about their desire to have significant power uprates and higher capacity factors from the existing reactors and then new ones that went beyond the capacity the current fuel could use. And we're coming up next year on the 70th anniversary of uranium dioxide pellets as the main nuclear fuel with really just slight innovative tweaks along the way for 70 years. But what Lightbridge has done is not tweaked that, it's developed something very different to meet what the utilities are looking for. So we think we've derisked it by providing what the utilities are looking for and by continuing to be advised by and work closely with the utilities that we need to be the customers of our product. So listening to the voice of the customer. Another is that we're running the project in a way that the financial risk doesn't have gigantic leaps. We're going from capsule radiation with small samples at Idaho National Laboratory in the advanced test reactor to loop irradiation mimicking commercial reactor activities to now we're finalizing DOE authorization of our pilot plant that will make lead test assemblies for commercial reactors and then a commercial plant but that's expandable that will start at a small scale and expand. If we had to go straight to a full-scale commercial plant, that would probably be a leap too far, but we're managing it by doing it in much more manageable pieces.
Very interesting. So I think that's great insight. Trying to make sure that you're not looking at taking huge leaps at once, but are trying to take more well-defined steps where you can derisk along the way. Very interesting. Then Vas, I have a question for you. So actually here in New York, maybe about 10 blocks away from here a couple years ago, Bank of America and a number of other financial institutions signed up on a pledge to commit to supporting nuclear projects, which I thought was a very landmark opportunity. As you all know, making a commercial commitment on the one side versus actually getting comfortable underwriting projects and writing checks and getting through risk committees and so on can be a very different proposition. So I'm just wondering whether you could shed a little bit of light about how BofA and to the extent others have been navigating this process and getting comfortable with the financial attributes and credits of nuclear projects.
Sure. And thank you for having me and hosting this. So I think you're referring to the Triple Nuclear Directive which originally with sovereigns and then went to kind of ecosystem partners and we were one of the signees around this time I guess two years ago. I think that was very much focused on existing nuclear technology which in theory is less risky than some of the new nuclear technology or advanced nuclear technologies. And so we've supported that not just in the US but also internationally with trying to see where we can deploy our balance sheet. But there are very few projects as everybody knows that are actually hitting FID and moving forward. There I think we've tried to think about can we support on the supply chain, something that is mentioned there. And then we've thought about more broadly how can we support. So the team I'm part of is our infrastructure and sustainable finance team. We have a $1.5 trillion goal of sustainable finance by 2030. We have recently announced an America-specific goal of $250 billion for America's 250th year, which is an 18-month pledge leading up until next July 4th. So we've got these concentrated efforts and thinking about how can we support our clients. But to the point being made, the risk of what we are being asked to do as a commercial bank sometimes doesn't fit, right? And so we aren't supposed to take technology risk. We're not supposed to take first-of-a-kind commercial deployment risk. And I say that we're not supposed to because we have shareholder capital, we have depositor capital, and we have regulators who tell us not to do that beyond our own risk framework. So there is a challenge to your question and so we think about how can we support these earlier stage companies and some of it is just capital markets, right? So it's not going to be the bank balance sheet. It is going to be that we are a convenor of capital and so we can mobilize capital and we do that from everything from just supporting companies at the earliest stages but helping them raise the venture capital and the growth equity that's necessary to fund the development work, derisk their technology, build up the supply chain, build up projects, get them to final investment decision. We also do it by participating in some of these convening bodies and declaratives. But the last thing we also do is we try and think about how do we use where the sectors and technologies where we have been able to deploy our balance sheet and how do we use that knowledge to try and build up a sector like the nuclear sector where you're not having access to bank capital. And so one of the things that was a little bit striking to me today is this is my third nuclear event today. We hosted a nuclear breakfast. Bloomberg hosted a nuclear lunch. This now. And in those forums, one of the things that was clear was the participants were really asking for like, hey, financial institutions and private equity funds and infrastructure funds, tell us what allowed you to deploy capital, right? What was the thing that a company, a project reached? And so we do a lot of education and I know that's not capital but it's like we talked about the first advanced geothermal was recently financed earlier this year. That was not something I mean that was a project that I worked on for about two years. I never thought we were actually going to get it done to be honest. I just have to be honest with people and the company knows that. But we found ways and we saw derisking because they had operating history even on a small tiny little pilot. And so we could see the things that were risky. We could say, okay, they have experience data. I'm able to look at that experience data, say, what is their underwriting assumption on their next project? Does that experience data align with their underwriting or what they're projecting? I was able to say they put equity in first, right? A lot of times it's as simple as that. They funded the majority of what was risky on that project with equity, right? That was subsurface. When you think about nuclear, there are parts of a nuclear power plant that are actually quite derisked, right? That we either have the supply chains exist, the experience of building them exists, right? So I'm talking about the actual power generation side, turbines, etc. That all is something that we know how to do. So when we start breaking down these large projects to your point you made into smaller size things that we can digest, I think that's how banks are going to be able to and even before us, right? We need the infrastructure capital to come in. We need the private equity to come in. It can't just be kind of on the venture side only for new nuclear and then there is some private equity obviously in existing.
Very interesting. Maybe just if you can kind of elaborate because I thought your insights there were great as well. I guess which issues and I guess in your opinion remain like the stickiest?
I think at the end of the day the thing that we can't overcome is technology risk but technology risk is not just about will the technology work or can we construct it and meaning on budget on time or relatively within what's projected or expected. The biggest challenge we face is the way that debt and equity investors get paid back is by selling electrons. And if you're not performing how you have projected and your operating costs are higher or you're not operating whatever it might be then you're not producing the revenue depending on how your PPA is structured it might go away altogether. And right now a lot of those PPAs are at a premium selling into market prices might not make the product pencil. And so that's the biggest challenge because my response to people is like, hey, if we build the first one, will you finance the second one? And if you're listening to a lot of investors, we're saying, hey, we need to see you build the first one. And so the obvious thought is, hey, we'll finance the second one. The truth of the matter is it will still be very difficult to finance the second one because I'm going to say, oh, well, I want to wait to see your operations. I want to see and you're going to tell me, hey, it doesn't work if we have to build it four or five years, operate it for several years and then start the development work on project number two, right? We don't scale. We don't hit that Triple Nuclear Directive goal. The new technologies, Gen 4, etc. doesn't happen. And so I think the challenge really is that's the biggest challenge. I don't know yet today what the moment is that we can flip and say yes we're ready to finance.
Super interesting. And yeah just a very significant challenge. And Jeff, so I think some of what we talked about is not necessarily but like a bit domestic focused. And we're obviously not talking about nuclear just in the US talking about it around the world. And EXIM has played an incredible role in that and I think is looking to be even more ambitious. It's obviously a huge year for EXIM as well. So I'm just wondering if you look at EXIM's toolkit, US EXIM's toolkit more broadly, which aspects of those do you think have been most helpful or most impactful when it comes to derisking projects?
Yeah. Well, thank you for the question and thank you for allowing me to be here again. I was here last year and spoke on a panel and Jennifer graciously invited me back which I was surprised. I mean maybe I wasn't as bad as I thought I was. So it's always a pleasure to be back. This is not my third nuclear event today. But I think it is my third Atlantic Council event for the Global Energy Center that I've had this week and I'm always proud to join with them. To your question though, the things that EXIM has traditionally done frankly had to be redone when we took over at the bank a little bit more than a year ago. I think this was one of my first events after I joined the bank last year. And frankly, we had not done what we should have done when it came to nuclear power, civil nuclear power. We were quiet. We were slow if we moved at all. And we had to really take a whole new look at what it was that we had in our toolkit and how we could apply it and how we could unlock those projects. And for us critically, it's applying our financing mechanisms to projects abroad and making sure that those projects abroad choose the right technologies and the right providers. And we know what the world of competition looks like. Those markets aren't necessarily free, fair, or functioning. And so our role is to come in and to help balance those markets out and to put our technology providers on a level playing field with those non-market actors frankly because this is not a market-based power solution when you think about nuclear power globally. It is in the US. But when we're talking about building projects abroad, these are really state-owned entities, state-owned financers, and state-owned suppliers of electrons that are in this conversation. And so what we really look to do is we look to jump into a project and to unlock and crowd in private capital alongside of us. So I don't think it's a surprise to anybody in this room that EXIM has engaged with PEJ in Poland for the buildout of an AP-1000, with an EPC that is a US-based EPC in Poland. We're doing that via a letter of interest that we've signed to a large amount. I mean, it's $20 billion. Now when we sign that LOI, we know that we're taking a big chunk of the project finance and committing to that. But what I will tell you is our intention is not to finance that entire 20 billion alone. It's to put a flag in place to crowd in private capital alongside of us and to serve as a derisking mechanism for our partners who want to come along and to say, hey, we like this, but there's a lot of risk here. There's first-of-a-kind risk in some occasions, not with the Westinghouse AP-1000s, but there's some first-of-a-kind risk in some of these projects. There's build it on time, build it at cost, stick to the schedule risk. There are some technology risks that are associated with this. And our job is to come in and to play a derisking role when it comes to putting senior debt into the facility. And that is very very complicated. It's one of the most challenging things we do at the bank from a project finance standpoint. And our teams are very diligent, but it's not easy and it takes longer than it ought to, frankly. But we're getting better at it. I will tell you it's a little different though for the advanced technologies for the SMRs. And I just got back last week from Bangkok and spent a week in Bangkok talking about liquefied natural gas, but the conversations that came alongside that were about SMRs. So I had a conversation with the energy minister of Thailand and he said, oh yes, yes, yes, LNG, but we also want SMRs. I've had the same conversations with counterparts in Singapore. I've had the same conversations with counterparts in Bulgaria and Romania and throughout central and southeast Europe. This is a technology that will get deployed. We will put financing in place to help deploy it, but we'll have to do it in partnership with other ECAs, other development finance institutions, and our colleagues in the private sector like Bank of America. We're going to have to unlock the full stack of capital to do that. And I think that's really the primary tool in our toolkit is to be that financial convenor, if you will, of capital to really come into these projects and unlock them.
Very interesting. And I guess what do you feel if anything again if you look at the menu of options and so on that EXIM has and all the capabilities what do you feel is being underutilized by potential applicants?
You know, it's an interesting question and one that I think is somewhat difficult to answer, but if I really had to put some scrutiny to it, I would say it's really probably along the supply chain and not understanding that as we discussed that it's not just one solid project that there are lots of bits and components that go into this and that we can help finance the supply chain associated with these projects themselves. You know, it's one thing to put a big number out and say we're going to work on project finance for this project, but man, if you need suppliers to stand up and help you, that's a place where we can put our Make More in America initiative at play and we can really stand up advanced manufacturing here and the supply chains here so that we have a robust ecosystem to deploy this technology abroad. And I think that maybe that's the most underutilized portion of our toolkit is understanding that it doesn't necessarily have to be you, but it could be your tier 2, tier 3, tier 4 supplier who can come into the mix and obtain financing, strategic patient long-term sovereign capital to really deploy out not for project one, but for project three, four, five, six.
Super interesting. I guess it's probably a good segue, talking more about the supply chain on that area. So I mean you all, Seth, are working on some new technology and fuel and on the fuel side. Can you talk a bit more about what that is, about where it provides value relative to conventional fuel and how are you derisking its commercialization process for even just for introducing the fuel and so on?
Right, so it's a fuel that we invented as well as the process of making it, a co-extruded metallic fuel, not pellets in a tube, with three main areas that add value to the utilities. One is a power uprate. So that could be up to 10% for an existing plant without changing the steam generator or up to 20% if you change the steam generator which the utilities do periodically and about a third more power for new build reactors with greater capacity steam paths including the turbine. So you could build three reactors and get the power of four. So this not only brings added revenue to the utility by selling more power but also can be used to actually reduce the price per unit of electricity produced, lower people's electric bills on the levelized cost of electricity. The second is through increased capacity factors of reactors and that's partly by lengthening the fuel cycle. So the reactors are running on days they otherwise would have been closed for refueling and also by having a quicker ramp rate. So the reactor can drop down into an outage and come back to full power from an outage much quicker than with the current fuel. And that also allows the utilities to sell more power. And finally safety enhancements that are quite significant in an already very safe industry. This fuel will run about a thousand degrees Celsius cooler down the center line of the fuel rod than the current fuel. Has many safety advantages that utilities are starting to look into potentially being able to be licensed to have commercial-grade equipment where they now have nuclear equipment such as in emergency diesel generators that actually can save millions of dollars per year per plant. So those three come together, but it really is about the power uprates and it's very interesting how we working in nuclear in some ways can collaborate and help each other but also be competitors in some ways. So with Lightbridge, we certainly see many SMRs as potential customers for our fuel and getting these benefits, but we're also to some extent a competitor in that if you have a utility with several 1,000 megawatt electric reactors and they upgrade one of them 20% and another 10% that's 300 megawatts electric. That's one of the bigger SMRs without having to build an SMR. And eventually you'll run out of reactors you could operate. But there's about 400 in the world that we think we can. About a quarter of them are in the US and but then as you build new SMRs, they could have higher power or lower cost of electricity and these other advantages. So sort of competitors and a market.
