Could building a nuclear power plant be much cheaper? "The government is not considering this solution."

• The European Commission is still engaged in tough negotiations regarding the financing of Poland's first nuclear power plant, at Lubiatowo-Kopalino in Pomerania. Construction of the AP1000-based facility is scheduled to begin in 2028.
• Warsaw is applying in Brussels for consent to granting enormous public aid to Polish Nuclear Power Plants – the company implementing the project.
• PEJ is also responsible for obtaining other sources of financing, which, considering the fact that we have no experience in building nuclear power plants, will not be cheap, experts say.
• The British government has secured private investors for the construction of the nuclear power plant. These are pension funds. London secured the funds' interests with pre-financing. The Polish project does not provide for such a financing model.
• We will discuss the role of nuclear energy during the Energy Days conference, which will take place on October 1-2, 2025 in Katowice .

On Friday (July 25), before a meeting of the reconstituted government, Prime Minister Donald Tusk announced that key decisions regarding the construction of small nuclear reactors (SMRs) are to be made this summer. "They (SMRs - ed.) are a real opportunity for the Polish economy," Tusk said.

Protracted negotiations with the Commission and an EU budget that provides funding for nuclear energy, but...

However, we will have to wait a bit longer for key decisions regarding the construction and financing of a large nuclear power plant at the Lubiatowo-Kopalino location in Pomerania, probably until 2026.

At least this is what unofficial findings from journalists at the European Commission suggest, although the Government Plenipotentiary for Strategic Energy Infrastructure, Wojciech Wrochna, also recently said that talks with the Commission could be completed sooner , at the end of 2025.

Meanwhile, Marek Woszczyk, the new president of Polish Nuclear Power Plants (PEJ), the investor in the project, announced during the last meeting of the parliamentary subcommittee on energy transition, which took place a week ago, that the company plans to submit an application for a building permit for the power plant in 2027. The pouring of the so-called nuclear concrete for the first unit is scheduled for 2028.

Although Woszczyk assured that the construction schedule was not at risk, he admitted that one of the biggest challenges was obtaining the European Commission's consent for state aid for PEJ.

"For many years, the European Commission has been hostile to nuclear investments. However, this attitude is slowly changing, especially after a report published by the European Commission's Joint Research Centre (one of the European Commission's Directorates-General – the Joint Research Centre – ed.)," says Adam Rajewski, Operations Director at Nuclear PL.

The EU Centre's report, mentioned by Rajewski, is consistent with publications by, among others, the International Atomic Energy Agency (IAEA), which in turn is a specialized agency of the United Nations (UN).

It states, among other things, that: " nuclear energy has much to offer in terms of reducing air pollution or greenhouse gas emissions, energy security and diversification, and fuel cost variability."

If nuclear power is an environmentally friendly fuel, why doesn't the European Commission treat nuclear investments on an equal footing with renewable energy sources (RES)? The Multiannual Financial Framework for 2028-34 (MFF) does not provide for co-financing of nuclear power plant construction from EU funds, while funds in the EU budget are reserved for gas, which is more harmful to the climate...

In response to our questions, Commission spokeswoman Paula Pinho replied that the 7-year EU budget includes funds for investments related to nuclear energy , but only for projects provided for in the annex to the regulation on the implementation, monitoring and evaluation of the Union budget.

The document states that nuclear financing covers categories such as: nuclear fission and other fission and fusion activities (but only within the framework of research and innovation) , decommissioning of nuclear facilities and radioactive waste management, as well as other activities related to nuclear safety.

"This regulation applies to the entire MFF. However, it is important to emphasize that this is a proposal with a list of potential areas. Actions can only receive funding if explicitly provided for in a specific financial instrument and under the conditions specified therein," explains Pinho.

The Commission spokeswoman emphasises that the list of areas mentioned in the annex described above does not in any way prejudge what will ultimately receive funding from the EU budget.

- In September, the second round of proposals related to the Multiannual Financial Framework will be considered, including proposals regarding nuclear energy, safety and research - informs Pinho.

Financing the construction of nuclear power plants could theoretically be included in the EU budget for the next 7 years, but for this to happen Poland would have to build a strong coalition of countries interested in such projects, and according to Adam Rajewski, this is unlikely to happen.

A massive injection from the state and bank loans. No private investors.

According to PEJ, the financing structure of the Lubiatowo-Kopalino nuclear power plant is based on 70% debt financing , with a significant share of export credit agencies , and 30% equity (the funds will be transferred by the State Treasury in the form of a capital injection into the company).

Based on the Act on the Preparation and Implementation of Nuclear Energy Investments and Associated Investments, amended this year, PEJ will receive PLN 60.2 billion from the state budget by 2030. "The condition for releasing this portion of the financing is the European Commission's approval of the state aid," the company admits.

Regarding the loan component, PEJ has so far secured approximately 70% of the necessary financing. A total of 11 financial entities from Europe, North America, and Asia have expressed their intention to engage in the project.

"We intend to raise the remaining approximately 30% of the debt financing on the commercial market, including domestically. In accordance with the support mechanism notified to the European Commission, the debt financing will be covered by State Treasury guarantees," Polish Nuclear Power Plants (PKJP) emphasize.

The entities said to cover 30 percent of the financing needs include a "consortium" consisting of the Industrial Development Agency (ARP), Bank Gospodarstwa Krajowego (BGK), and the Polish Development Fund (PFR), as well as two banks: PKO BP and Pekao.

"PEJ projects will be financed using several key financial instruments. The most important of these are export credits, granted by export credit agencies based on the value of equipment originating in a given country. The leading role here is played by the US EXIM Bank, which has declared its willingness to cover approximately half of the currently estimated debt financing needs, " PEJ reports.

As the investor adds, in the longer term, it is also planned to obtain funds from the US International Development Finance Corporation (DFC), Export Development Canada (EDC) and the French Bpifrance Assurance Export and Sfil.

"All the above-mentioned institutions declared their interest in financing the Polish nuclear power plant and confirmed it by submitting appropriate letters of intent," we read in a press release.

The second important source of financing will be commercial loans taken out on the financial market.

"At the turn of the third and fourth quarter of this year, we plan to enter the commercial market – both domestically and internationally. In preparing for this process, Polish Nuclear Power Plants are supported by experienced advisors from BNP Paribas France and KPMG," PEJ wrote in a press release.

A company without any experience will not find it easy to get cheap money on the market

A special report for new nuclear investors, which is a set of recommendations prepared by the International Atomic Energy Agency (IAEA), points out, among other things, numerous risks associated with financing such projects , including changes in the economic situation (i.e., an economic slowdown or crisis), lack of experience in managing nuclear projects, which directly translates into higher risk and a higher cost of money, long financing periods, as well as exchange rate risks – which is crucial for countries such as Poland, which imports all its nuclear technology and know-how from the US and settles its payments in dollars.

"Construction of a power plant in Pomerania will undoubtedly be one of the most expensive investments in Polish history. Global experience (e.g., reports from the OECD's Nuclear Energy Agency) indicates that financial support costs can account for 30 to even 60 percent of the total investment cost. Considering bond yields and schedule difficulties, the cost of support could exceed 60 percent," estimates Professor Paweł Wojciechowski, economist and former Minister of Finance.

He adds that it is the PEJ company, not the state, that obtains funds directly on the market, which is also important when calculating the costs of the investment, which will have to be maintained even after the reactors are decommissioned, which is expected to happen 80 years after they are put into operation.

Moreover, there are not many entities on the market that offer nuclear financing to companies.

In the past, the World Bank, the European Investment Bank, and a wide range of commercial lenders have financed nuclear projects. Recently , the Latin American Development Bank (CAF) is the only international development bank to have provided such a loan: to support the modernization and license expansion of Argentina's Embalse nuclear power plant. This was in 2013.

The World Bank does not currently allow financing for nuclear projects.

On the other hand, there are also international guidelines, such as those developed by the Organisation for Economic Co-operation and Development (OECD), that strictly regulate how export credits from government agencies can be used to finance nuclear energy projects.

Under OECD rules, export credits are eligible for up to 85% of the contract value, and for costs incurred in the importing country up to 15% of the export contract value. The remaining foreign and domestic costs must be financed from commercial credit and equity. However, the terms of these credits cannot exceed 15 years.

The British have both private investors and pre-financing. This will drastically reduce investment costs.

When building the new Sizewell C nuclear power plant, worth £38 billion, the government attracted private investors – specifically large pension funds , which was not possible in Poland.

The funding is secured by pre-financing. Each household contributes £1 per month to the project, added to their electricity bill for the entire funding period, before the plant even starts operating. According to the British government, this will generate enormous savings of as much as 20% of the project's planned costs .

As we learn from the formally liquidated Ministry of Industry, " such a financing model is not being considered by the government . The notification application also does not cover such a mechanism," it was written briefly in a press release sent to the CIS.

The British model, based on pre-financing, is a form of state aid . In Poland's case, the European Commission would therefore have to notify whether the agreement complies with internal market regulations. This poses a certain risk.

The Polish model assumes a contract for difference, which provides for a price for nuclear energy in the range of PLN 470 to 550 per MWh from 2035 , when the nuclear power plant is scheduled to be launched.

It's worth recalling that a bilateral contract for difference works this way: if the market price at which an investor sells energy is below the strike price, the government pays the difference. If the market selling price is above the strike price, the investor returns the surplus to the government.