1. Evolution of nuclear power plant vendor offerings
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Evolution of nuclear power plant vendor offerings
International Industry Forum ATOMEXPO
June 26-28, 2013
Anton Poriadine, Partner

2. The customers ordering nuclear power plants have changed, so did the vendor offers
Key decision criteria
1970s
1980s
1990s
2000s
2010s
Safety
Price
Safety
Price
Technology
Safety
Price
Technology
Economic benefits to the country/ community
Technology transfer
Economical
Price
O&M cost
Technical
Safety
Technology
Political
Economic benefits to the country/ community
Technology transfer
Economical
Back-end fuel logistics
Energy independence
Price
O&M cost
Decommis-sioning
Proliferation resistance
Technical
Safety
Infrastructure
Customized solutions
Technology
Financing support
Strategic
Turnkey solutions
People development
Political
Economic benefits to the country/ community
Environmental
Knowledge transfer
Environmental performance
Ability to switch vendors easily …
Technology transfer
Additional services
Fuel security
Source: A.T. Kearney
Reactor
Plant
Solution

3. Today the winning offer is an integrated, customer-tailored solution
Key elements of integrated offer
Regulatory Support
Licensing
Shaping regulatory body
Community outreach
Local community programs
Local infrastructure
Contracts with suppliers, employees
Legal Support
Legal representation
From…
…selling a nuclear reactor…
…to selling a 1MW of clean energy…
…to selling a integrated energy solution to boost local economy
O&M: BOO1
O&M support
Fuel services
Technology cost
Nuclear power plant
R&D, Engineering
Knowledge & technology transfer
Examples
Areva won contracts in Finland and Brazil through offering a competitive NPP proposal and tailored solution to local economy, eg partial localization and infrastructure development
Rosatom won project in Iran through offering a competitive NPP proposal and political support
China National Nuclear Corp (CNNC) won a project in Pakistan through offering a competitive NPP proposal, technology transfer , and infrastructure development
Nuclear services: reprocessing, decommissioning
Infrastructure development
Grid connections
Transmission lines
Political support
Working with government
Supply localization
Financial Support
Securing loan guarantees
Providing loans
Core
Focused on vendor’s solution
Focused on local economy
Build Own Operate
Source: A.T. Kearney

4. Winning this game requires a building a competitive line up of key competencies and managing them in a seamless manner
Evolution of vendor competencies
Market access & business platform
political, regulatory, legal, commercial, financial …
Equipment manufacturing
Engineering, Research and Development
Fuel front end and waste solutions
Installation, startup and maintenance services
Integrated project management
Many vendors 1) create alliances 2) outsource/ localize with equipment manufacturers possessing the competence 3) retain the capability for critical equipment manufacturing (GE-Hitachi, Westinghouse and Chinese companies -China First Heavy Industries and China Erzhong)
Engineering is considered to be the core competency, which vendors are continuously enhancing and developing (Hitachi, Toshiba)
Vendors see installation and startup competencies critical to NPP consternation success. Maintenance of the critical equipment is seen as a good long term revenue generator (Areva)
Synchronisation
Flexibility
Responsiveness
Traditional business models are changing towards cross-functional competency management, centralization of market facing functions and outsourcing of non-core ones
Source: A.T. Kearney

5. For example, localization is one of the challenges that requires a synchronized and coordinated approach
Type of localization by elements of value chain
Example
Research/ Engineering
Procurement
Production/ Project realization
Marketing & Sales
Service
Creation of research centers with different levels of autonomy
Procurement of materials and services from local suppliers
Construction or acquisition and managing of plants in the region
Local distribution
Product adaptation for local market
Service provision by local players
Examples from the nuclear industry:
KEPCO established International Nuclear Graduate School for engineers in ME and Asia
Areva has reached 85% of local procurement on some of its NPPs in China (Ningde 3,4)
Rosatom is to build NPP on BOO basis in Turkey, and helps local companies to get contracts and jobs
Areva helped to adapt its M310 reactor design for Chinese market, and expand the number of NPPs built
The service of Russian designed Temelin NPP is performed by local companies1
With the exception of fuel manufacturing
Source: open sources, company data, A.T. Kearney

6. The result of the integrated nuclear offer is a significant boost to the local economy
Example: Temelin (CZ) - Unit 3 and 4 project
Cumulative discounted effect
23,1
2,2
49,0
Indirect
Local infrastructure
Adjacent industries (transport, education, banking, water, services, etc.)
Economic development benefits - increase of investment attractiveness of the region, more educated population…
1,2
~€ 8 Billion total investment
70% localization1)
29,0
18,1
Direct - Suppliers of goods and services
Equipment manufacturing
Building materials
Construction work
Plus 600 to 1000 permanent jobs with more than average salaries in the local area
1,0
20,0
5,0
Revenue (€B)
Taxes (€B)
Employment (’000 FTE)Employment (’000 FTE)
40% construction and 30% manufacturing
Revenues and taxes discounted on mean real interest rate of U.S. Treasury bill during the 20th century (0,9%)
Employment includes maximum number of employees during the project realization
Source: A.T. Kearney, OECD symmetric input-output model by Wassily Leontief