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BALTIC NPP PROJECT

BALTIC NPP PROJECT. Maxim Kozlov, Head of Project Team “Baltic NPP”. Energy Dialogue Russia - EU 17 September 2010, Moscow. Project Highlights. The Baltic NPP (2 x 1150 MW) project is developed in the East of the Kaliningrad region incorporating 2 VVER-1200 units; 120 km from Kaliningrad

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BALTIC NPP PROJECT

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  1. BALTIC NPP PROJECT Maxim Kozlov, Head of Project Team “Baltic NPP” Energy Dialogue Russia - EU 17 September 2010, Moscow

  2. Project Highlights • The Baltic NPP (2 x 1150 MW) project is developed in the East of the Kaliningrad region incorporating 2 VVER-1200 units; 120 km from Kaliningrad • The construction cost of the NPP is estimated at c.a. €5 bln • It is proposed that the project will be owned 51% by Rosenergoatom and 49% by one or more private investors, incl. foreign investors • Unit 1 1150 MW construction schedule - 2010-2016 • Unit 2 1150 MW construction schedule - 2012-2018 • To deliver power from Baltic NPP, it is necessary to build OHL 330 kV in Kaliningrad region and cross border power grid facilities including HVDC • The construction cost of these transmission assets is estimated from €0,5 to 1,6bln depending on chosen technical variants.It is possible that the cross-border transmission lines could be a separate project with the involvement of foreign investors.

  3. Project Status • Government resolutions approving the construction of Baltic NPP are issued • Site licenses are issued • Preparation works on site started 25 February, 2010 • Power delivery options’ assessment has been prepared • Environmental impact assessment has been prepared • Feasibility Study for third party investors started • Designated legal entity JSC “Baltic NPP” is established • “First concrete” of NPP – April 2011

  4. INTER RAO UES commitment INTER RAO UES is acting on the basis of Authorization Letter from Rosatom and is responsible for: • Outlining the terms and conditions on which the involvement of foreign investors in Baltic NPP will be possible. This will be developed as part of the Bankable Feasibility Study • Development of power delivery model and electricity export options

  5. LAES-2 – a prototype of the Baltic NPP The Baltic NPP is a commercial project of “AES-2006” nuclear power plant on the basis of LAES-2 Project • The design of the prototype plant – Leningradskaya NPP-2 (LAES-2) successfully passed all the required state expert reviews; • Technical solutions of the Baltic NPP design comply to the Russian technical norms, requirements of EUR, IAEA, YVL and specifications of the Client (Rosenergoatom Concern, JSC) to the “AES-2006” design; • The declared parameters of safety and economic efficiency are supported by the availability of references, licencability, and familiar character of the construction technology; • All technical solutions have been and are currently being worked out during the engineering, construction and start-up of the first two units of LAES-2; • The volume and timeframe of engineering, construction and installation works have been optimized; • The potential suppliers of major equipment have been identified.

  6. Baltic NPP safety Containment – protection from external events Seismic loads NPP is developed with stability to earthquake Aircraft Protection from the fall of an aircraft Wind loads Whirlwind and tornado protection External explosion NPP components responsible for the safety are developed with ensuring the security of percussion coursed by the external explosion. Snow and ice load Extreme snow and ice protection

  7. View of the Baltic NPP from the side of oil & diesel storage

  8. Current view of the construction site

  9. Scheme of the Main Grid of Power Ring BRELL(Belorussia–Russia–Estonia–Latvia–Lithuania) 9

  10. Kaliningrad Region Power System Baltic NPP location

  11. The prospective balance of Kaliningrad power system

  12. Power Balance in the Region The main mission of Baltic NPP – to secure energy supply of Kaliningrad region Deficit in the region varies from 10 to 14 TWh/year and corresponds to c.a. 2000 MW power capacity Source: Market based analysis of interconnections between Nordic, Baltic and Poland areas in 2025 Scenarios: BAU-2015, BAU-2025 * On the basis that the new plant planned at Visaginas proceeds and is put in operation Baltic NPP could be a solution to the problem 12

  13. Scheme of the main grid of Kaliningrad region power system in 2018 Мамоново

  14. Nord Stream gas pipeline Nord Stream gas pipeline HVDC Cable line

  15. Development of cross-border power links in the Baltic region 1. Lithuania – Sweden HVDC cable line 1000 MW 2. Estonia – Finland HVDC cable line650 MW 3 Alitus (Lithuania) - Elk (Poland) , DC OHL 1000 MW 4. Ross (Belorussia) – Narev (Poland), DC OHL 600 MW

  16. In addition to the above, Poland is also engaged in a nuclear program development based on a 4-stage plan: legislation by 2010; site, technology and construction arrangements in 2011-2013; technical plans and site works in 2014-15; and construction in 2016-20. • Our forecast shows that in the long run several NPPs may well co-exist in the region Neighboring Nuclear Projects Kaliningrad Belarus Baltic NPP Start of works: 2010 Installed capacity: 2x1150 MW Construction period: 2010-2018 Commissioning: 2016(1st unit)-2018 (2nd unit). NPP in Grodno region Installed capacity:2x1150 MW Start of works depends on the financing issues with Russia Commissioning: not earlier than 2018 Lithuania NPP Visaginas Negotiation process. Installed capacity:3000 - 3200 MW Commissioning: not earlier than 2018

  17. Nuclear Power is a Sound Solution Guarantee for energy supply Climate impact control– Kyoto Protocol Economic competitivenessin the long-term run taking into consideration the growing share of electricity free market Nuclear power program contributes to the development of the national high technology sector (engineering, manufacturing, and operation). Smart grids development – the planned demand for the base load nuclear electricity is growing • Competitive Advantages Challenges and Tasks • Huge CAPEX exposed to licensing, designing, procurement and construction risks (although predictable stable OPEX) • Growth of NPP construction – need of increasing manufacturing capacities • Development of localization and technologies’ transfer • Financing of NPP construction shifts from state to private sector • Necessity to develop new financing mechanisms to attract private investors

  18. Rosenergoatom – majority shareholder in Baltic NPP • World’s #1 for reactors under construction • World’s #2 for number of reactors in operation • World’s #2 for installed nuclear capacity • World’s first NPP built in Russia in 1954 • Ambitious world-wide expansion plans • Safety standards exceed IAEA norms • Nuclear technology development acknowledged as one of six top national hi-tech priorities in Russia www.rosenergoatom.ru

  19. Potential Baltic NPP Financing Sources DEBT EQUITY Project finance Multi-laterals Utilities No NPP has ever been financed on a non-recourse PF basis Financing based on future cash flows Transfers risk from sponsors to the project Bonds Government Corporate debt Financial investors ECAs

  20. Models of NPP Projects Implementation Pure Commercial Model Traditional State Budget Model • Trend toward limited recourse financing structure • Private sector financed, built and operated • Key risks to be addressed • A new-build project is developed and financed on State budget • Less compatible with free market structure • France, Sweden, Russia, China, India Hybrid Model Corporate Model (Balance sheet financing) • The project is started with own equity (sponsor’s capital and bank loans), then at the construction stage the financing of investment is restructured to project financing model • Trend toward limited recourse financing structure USA, Canada, Finland • Corporate funds investment project • Economic return through long term power off take (optional) • Government potentially «backstops» end-of-cycle liabilities and waste disposal • Finland, France, USA Private Baltic NPP ? Balance State – Private Risks Sharing State Private Balance State – Private Finance Guarantees Source – ASE 2010

  21. Action Plan 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 NPP construction commissioning unit 1 commissioning unit 2 Feasibility Study Presentation of the concept to strategic investors Involvement of investors Feasibility Study on power transmission options Design and Construction of power lines and substations Signing of PPA’s Trade negotiations 21

  22. Baltic NPP – attractive investment • Strong political support for the Baltic NPP project from the Russian government • Need to assure reliable energy supply to the Kaliningrad region • Expected deficit of generation in the region => strong export potential • Harmonization with EC’s Baltic energy market integration plan (BEMIP) • Proven, safe and reliable reactor technology • Improvement of transmission infrastructure in the region • Established legal framework for NPP construction and operation in Russia • Attractive geographical position • Diversified investments: NPP, transmission grid • Opportunities for further cooperation in similar projectsin the future

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