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Varna, 27-29 May 2009Varna, 27-29 May 2009

NUCLEAR ENERGY IN ROMANIA – A ROAD TO ENERGY SECURITY

Teodor CHIRICA – Senior Adviser, NuclearelectricaTeodor CHIRICA – Senior Adviser, NuclearelectricaVice President, ROMATOMVice President, ROMATOM

Gheorghe Lucaciu – Deputy General Director ONETGheorghe Lucaciu – Deputy General Director ONET TECHNOLOGIES ROMANIATECHNOLOGIES ROMANIA

- Secretary General, ROMATOM- Secretary General, ROMATOM

CONTENTSCONTENTS

1. The Role of Nuclear Power in Europe

2. Romania – Nuclear Energy Structure

3. Nuclearelectrica - Cernavoda NPP Units 1 and 2 and the Nuclear Fuel Plant

4. Waste Management

5. EnergoNuclear: Cernavoda NPP Units 3 & 4

6. Financing crisis and nuclear energy revival

7. Second Romanian NPP

8. Conclusions

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THE ROLE OF NUCLEAR POWERTHE ROLE OF NUCLEAR POWER

IN EUROPEIN EUROPE

Europe’s heavy dependency on external energy supplies (50% today and more than 70% in 2030);

The European energy sector currently faces three major challenges:

– Ensuring security of energy supply – “Moscow”;– Sustainable development – “Kyoto”, and– Competitiveness – “Lisbon”

Nuclear Energy represents part of the answer to the above challenges, considering that:

– Nuclear safety is no more a major issue to the general public;– Nuclear Waste Management issues have to be better addressed

to the general public and decidents.

NUCLEAR ENERGY’S POTENTIAL ROLENUCLEAR ENERGY’S POTENTIAL ROLE

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439 reactors 439 reactors In June 2008In June 2008

……1400 reactors 1400 reactors in 2050in 2050

600 to…600 to…

Nuclear could expand by a factor of nearly 4Nuclear could expand by a factor of nearly 4

OECD NEA: Nuclear Energy Outlook '08

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ROMANIA 2008 ROMANIA 2008

ELECTRICAL ENERGY STRUCTUREELECTRICAL ENERGY STRUCTURE

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Shareholders Romanian State – 90.28% & Property Fund – 9.72%;Main Activity: Electrical Power and Heat Production, NPP Construction and Commissioning and Nuclear Fuel Fabrication

SOCIETATEA NATIONALA SOCIETATEA NATIONALA

NUCLEARELECTRICA (SNN) SANUCLEARELECTRICA (SNN) SA

SNN SACNE (NPP) CERNAVODA

Cernavoda – Units # 1 & 2Nuclear Fuel Plant

Pitesti

SAFE & EFFICIENT OPERATION OF UNITS 1 & 2 – CANDU-6: 700 MWe

NUCLEAR FUEL FABRICATION FOR TWO UNITS

Cernavoda 1 & 2 operational dataCernavoda 1 & 2 operational data: 2007: 2007 – 2008 – 2008Unit MWe Energy Production (MWh

brut)Capacity Factor

[%]Lifetime CF [%]

2007 2008 2007 2008

C# 1 706.5 5,518,346 5,222,976 97.62 84.83 88.16

C# 2 706.5 961,986 5,997,832 93.23 96.92 96.40

706.5 MW(e)706.5 MW(e)

UNIT # 1

NUCLEARELECTRICA: CERNAVODA NPPNUCLEARELECTRICA: CERNAVODA NPPUNITS 1 & 2UNITS 1 & 2

UNIT # 2UNIT # 1 UNIT # 2

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CUMMULATED RELEASES OF CUMMULATED RELEASES OF RADIOACTIVE EFFLUENTS (µSv)RADIOACTIVE EFFLUENTS (µSv)

LEGAL DOSE FOR PUBLIC: 1000 LEGAL DOSE FOR PUBLIC: 1000 SvSv

AVERAGE YEARLY DOSE FOR 10 YEARS OF AVERAGE YEARLY DOSE FOR 10 YEARS OF OPERATION: < 1,0% FROM LEGAL DOSEOPERATION: < 1,0% FROM LEGAL DOSE

COLLECTIVE RADIATION COLLECTIVE RADIATION EXPOSURE (man x Sv)EXPOSURE (man x Sv)

CERNAVODA NPP – CERNAVODA NPP – UNITUNIT 1 1IMPACT OVER THE PUBLIC AND ENVIRONMENTIMPACT OVER THE PUBLIC AND ENVIRONMENT

5,51 5,684,49

7,22 7,278,3

6,11

9,948,18

13,27

10,45

0

2

4

6

8

10

12

14

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0,24 0,25

0,45 0,460,57 0,55

0,81

0,54

0,73

0,56

0,27

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

0

446 g

818 g 955 g

0200400600800

10001200

nuclearelectrica pe gaze pe pacura pe carbune

CO2

Tip Centrală

The production of one kWh of electricity generates:

TWO CERNAVODA UNITS CONTRIBUTION TO THE REDUCTION OF THE ANNUAL EMISSIONS OF CO2 - ABOUT 5 MILLION TONS.

CUTTING CO2 EMMISSIONCUTTING CO2 EMMISSION

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CERNAVODA NPP – UNIT #2CERNAVODA NPP – UNIT #2

IMPACT OVER ELECTRICITY PRICE IMPACT OVER ELECTRICITY PRICE STABILITY!STABILITY!

Excellent commissioning experience achieved by SNN staff:

Unit 1: criticality to commercial – 229 daysUnit 2: criticality to commercial – 145 days

NUCLEARELECTRICA ON NUCLEARELECTRICA ON THE ELECTRICITY MARKETTHE ELECTRICITY MARKET

Nuclearelectrica sells almost 70% of the energy produced by Cernavoda NPP Units 1 and 2 on the regulated electricity market, where the price is established by ANRE (Romanian Energy Regulatory Authority) 30% is sold on the free electricity market and on the Next Day

Market

In 2008, Nuclearelectrica sold to the Customers about 10,700,000 MWh delivered to the Grid by Cernavoda NPP: 10,335,000 MWh

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NUCLEAR FUEL PLANTNUCLEAR FUEL PLANT

Present & FutureIn this moment, Nuclear Fuel Plant (FCN) is producing nuclear fuel for two units (approx. 10.000 fuel bundles / year / 2 Units) using Romanian uranium;

Plans to double capacity for Cernavoda NPP Units 3 and 4 future operation;

The projected growth of production, requires actions to prepare the security of uranium supply.

Therefore Nuclearelectrica started the qualification process of some UO2 suppliers (others than National Uranium Company)

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WASTE MANAGEMENTWASTE MANAGEMENTINTERIM DRY SPENT FUEL STORAGE FACILITYINTERIM DRY SPENT FUEL STORAGE FACILITY AT AT

CERNAVODA CERNAVODA SITESITE

MACSTORE Type (AECL Canada) – first module operational from 2003; second – 2006; third – February 2007;

Final profile: 27 modules – 50-80 years of storage for 2 Units;

DECOMMISSIONING – a new challenge!

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WASTE MANAGEMENTWASTE MANAGEMENT

ANDRAD- The National Agency for Radioactive Waste

was established in 2004 as the authority responsible for the management of the radioactive waste in Romania. Its main goals are:

–elaborating the legal and operational frame for the management and the disposal of radioactive waste

–Upgrading the final repository of existing Baita-Bihor dedicated to the radioactive waste of low and intermediary activity resulting from the institutional, industrial, medicinal and research activities

–Finalizing the DFDSMA- Saligny for radioactive waste resulting from the activities of Cernavoda NPP before 2014

WASTE MANAGEMENTWASTE MANAGEMENT

There are two PHARE projects for the final repository in Saligny on the role:

- Support to ANDRAD to get the siting license for Saligny LILW near surface repository PHARE RO 2006/018-147.05.01 and

- Design and safety assessment for licensing the construction of Saligny L/ILW National repository PHARE RO 2006 / 018-411.03.03

The economic operator is: ONET TECHNOLOGIES GRANDS PROJETS, member of the ONET group

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UNITS 3 & 4 CERNAVODA UNITS 3 & 4 CERNAVODA IN A NUTSHELLIN A NUTSHELL

MAIN CHARACTERISTICS:MAIN CHARACTERISTICS:

Reactor Type:Reactor Type: CANDU 6CANDU 6

Installed Output: 2 x 720 MWeInstalled Output: 2 x 720 MWe

Delivered Power:Delivered Power: 2 x 5,239 TWh/an 2 x 5,239 TWh/an

Completion Cost: Completion Cost: aproxaprox.. 44 bl. bl. EuroEuro

Schedule: Schedule: 64 months per unit64 months per unit

Unit Life: Unit Life: 30 years, possible 5030 years, possible 50

Electricity Price:Electricity Price: 28,2 - 32,528,2 - 32,5 Euro/MWh Euro/MWh

IRR: IRR: 9 -11%9 -11%

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NUCLEARELECTRICANUCLEARELECTRICA - - CERNAVODA 3 & 4 MMAIN AIN PROMOTER AND FOUNDING INVESTORPROMOTER AND FOUNDING INVESTOR

• The project is in accordance with the Romania’s newest energy strategy;

• Romania had a well developed nuclear infrastructure:– Heavy Water Plant;– Fuel Fabrication Facility;– Proven experience in construction, commissioning and operation of

NPPs– Technically Qualified CANDU Experienced Staff;– Nuclear R&D Program

• Negotiation Team mandate - Government Decree Nos. 643/2007 & 691/2008 referring to the Investors’ selection strategy, considering Nuclearelectrica’s stake of 51% in the Project;

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NUCLEARELECTRICA and NUCLEARELECTRICA and

CERNAVODA NPP: UNITS 3 & 4CERNAVODA NPP: UNITS 3 & 4

CERNAVODA NPPCERNAVODA NPP

UNITS 1 & 2UNITS 1 & 2

ENERGONUCLEARENERGONUCLEARUNITS 3 & 4UNITS 3 & 4

INVESTORS – 49%INVESTORS – 49%

NUCLEARELECTRICA SA

NUCLEARELECTRICA:NUCLEARELECTRICA:

OPERATION & MAINTENANCEOPERATION & MAINTENANCE

51%51% 100%100%

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ENERGONUCLEAR:ENERGONUCLEAR: CERNAVODA NPP 3 & 4 PROJECT MODELPROJECT MODEL

• Approval of the negotiations by Government Decree No. 1565/2008

• SN Nuclearelectrica SA jointly with six selected investors (Arcelor-Mittal, CEZ, GDF-Suez, Enel, Iberdrola and RWE) registered EnergoNuclear (EN) for the purpose of developing, constructing and operating Unit 3 and Unit 4 of the Cernavoda NPP;

• All seven investors will contribute with equity, assuming the market risk at the completion of the investment and in return will receive all the power produced from Units 3 and 4, proportionally with their investment in the EN;

• In return, for receiving the power from EN the investors/off-takers will undertake to fund the costs incurred by EN.

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Cernavoda 3 & 4 Cernavoda 3 & 4 PROJECT ESTIMATED COSTPROJECT ESTIMATED COSTUnit Installed

capacity(MWe)

Technology Estimated Budget

Expected Commissioning Date

C# 3 720 CANDU-6 EUR about 4.0 Billion

2015

C# 4 720 CANDU-6 2016

• Total estimated cost considers the rapidly rising cost of metals, forgings, other materials and labor needed to build a new nuclear unit, during the last two years;

• Coal, gas and other fossil-fueled power technologies all use the same raw materials that are escalating in price;

• Risks to be considered: cost escalation, congestion on fabrication cycle and limited human expertise, and recently the financial crisis.

ENERGONUCLEARENERGONUCLEAR - - CERNAVODA 3 & 4 PROJECT PROJECT ESTIMATED COSTESTIMATED COST

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• Initial Share Subscription: setting EnergoNuclear having a limited capital, and a duration of 18 months:

– Main activities: reviewing the Feasibility Study, definition of the Commercial Contract Type, negotiation and conclusion of main contracts: construction, finance, electricity off-take, operation and maintenance etc.);

– Pre-Project Works.

• Second Share Subscription: following the decision of the Investors to continue:

– EnergoNuclear capital increasing to the final level;– EPC and Financing in force;– Contract effective date and starting site activities– Commissioning and commercial operation;

• Project Completion: within 64 - 68 months for Unit 3, from the Contract Effective Date, with a delay of 6 to 12 months for Unit 4.

NUCLEARELECTRICANUCLEARELECTRICA - - CERNAVODA 3 & 4 TWO TWO STEPS APPROACHSTEPS APPROACH

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Capital construction for Power Projects costs increased by 100% between 2004 and 2007:

– Falling commodity prices due to an anticipated economic slowdown, may reverse the trend of quickly rising nuclear power plant construction costs;

– A slowdown in the global economy or a recession could reduce the labor costs as well.

Public opinion is veering in favor of nuclear power even in countries with moratorium or phase-out laws due to safe operation record and better communications efforts;

If the public is not convinced, national and local opposition could deteriorate the economics of nuclear energy.

NUCLEAR ENERGY VULNERABILITIES: COSTS NUCLEAR ENERGY VULNERABILITIES: COSTS AND PUBLIC OPINIONAND PUBLIC OPINION

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Impact on capital spending, financing harder to obtain, and financing costs would be higher, but:

– Companies’ plans for new nuclear construction not affected, but some delays are to be expected;

– Main Projects are at an early stage and by the time of financial close, two or three years away, is expected the markets to recover;

The fundamentals of energy demand will support the nuclear revival - the “structural trends” of demography, growth in emerging countries, energy supply security and greenhouse gas emissions reductions will support nuclear power expansion despite the financial crisis.

IMPACT OF THE ECONOMICAL CRISISIMPACT OF THE ECONOMICAL CRISIS

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Promoters of two new nuclear projects in Europe have abandoned attempts at pure project financing:

– Bulgaria - the government has recombined the state owned utility NEK with its former subsidiary (Kozloduy NPP), allowing cash flows from operation to support debt service for the new VVERs to be build at Belene;

– Romania - the original standalone project to build Cernavoda 3 & 4 has been converted into one where the government will take 51%, increasing the project’s financeability;

Compliance with EU competition directives to be demonstrated (the market economy operator test);

IMPACT OF THE ECONOMICAL CRISISIMPACT OF THE ECONOMICAL CRISIS(cont’d)(cont’d)

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SECOND ROMANIAN NPPSECOND ROMANIAN NPP

• Romanian Government is considering a second NPP to be commissioned after 2020, as far as the nuclear energy represents the main contributor to security of supply strategy and CO2 reduction:

– 2 to 4 units, up to an overall site capacity of about 2,400 MW;– Transparent site selection process up to 60 months (from

candidate to preferred and selected sites), including public consultations and site authorization by relevant authorities (Regulatory Body, Ministry of the Environment etc.);

– Sites on the internal rivers from energy deficit regions, as well as Danube River could be considered;

– Reactor Type – Third Generation (750 – 1,200 MWe/unit): EPR, AP1000, OPR 1000+, APR1400, ACR 1000, (Enhanced CANDU-6) etc.

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CONCLUCONCLUSIONSSIONS The Nuclear Program in Romania, part of the national and

European energy policy: sustainable development, security of energy supply and competitiveness;

Romania has a proven experience in construction, commissioning and operation of NPPs, as well as the necessary support infrastructure: Unit 2 completion represents the major project of Nuclearelectrica

during its first decade of existence;

Innovative approach of Nuclearelectrica related to Cernavoda NPP Units 3 and 4 completion: Major project for the second decade of company life; Risks management and allocation – major tool for project

management and financing closure;

Support from the political class is crucial, considering that the completion of such projects are covering more than one elections cycle;

Importance of the International Cooperation.

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Thank Thank you !you !