Mr Cosmin Ghita, you have been CEO of Nuclearelectrica since September 2017. How would you evaluate these 14 months in office from the standpoint of challenges and achievements?
I started my mandate at Nuclearelectrica during a period of preparation for the large investment projects of the company, during the liberalization process of the energy market but in a context of national and European support for the nuclear power. I knew I would find a highly skilled and professional team at Nuclearelectrica and I was right. My first priority was to streamline the activities of the company and to establish the main objectives to be implemented over a short period of time with impact on the long run: the refurbishment of Cernavoda NPP Unit 1, the integrated supply chain to ensure the predictable and stable operation of the nuclear fuel plant and of the units in Cernavoda, diversification of income sources and projects, an efficient human resources strategy designed to ensure retention of the highly qualified personnel and the overarching priority which is to maintain the high level of nuclear safety. As we are nearing the end of 2018, looking back at my mandate period at Nuclearelectrica, I am satisfied to see that the major initiatives are starting to take roots and I am also optimistic about the future projects and outcomes that we will deliver with direct impact on the security of our national energy system.
To summarize, the major highlights of this period were:
- The initiation of first phase of the Cernavoda NPP Unit 1 refurbishment project, approved by the GMS. The refurbishment of Unit 1 will allow the continuous operation of the unit for an additional 30 years under the same nuclear safety conditions, with an investment evaluated at less than half the cost of a new build.
- The strategy to diversify the raw material supply sources by means of a gradual transition to uranium octoxide to be processed by Feldioara branch, as part of the National Uranium Company, from uranium dioxide, until 2020.
- The acceleration of the negotiations with the selected investor for Units 3 and 4 and the redrafting of the strategy for the continuation of the project through a clear separation of the responsibilities of the state and of SNN in this process
- The strategy to develop the tritium removal facility approved by the shareholders with direct positive impact on the duration and the cost of the refurbishment outage of Unit 1
- The implementation of targeted human resources strategies that aim to retain within the company the highly qualified employees and to ensure new well qualified entries through a partnership with the Polytechnic Institute of Bucharest.
- Financial results above the levels of 2017, mostly due to market liberalization, increase of the forward segment of sales and a well balances and flexible sales strategy coupled with an increased degree of investment achievement.
The upcoming period will see a continuation of these projects, a concentration of the company’s efforts, both human and financial in order to successfully implement the established objectives and a constant attention to our most valued resource: the human factor.
2018 is drawing to a close. What could you tell our readers about this year’s results? Of course, it is too early for the review of the whole year, nevertheless tell us how the financial results look after the first ten months of the year and what are the forecasts? Will the initial estimates regarding this year’s revenue be met?
Due to the fact that Nuclearelectrica is a listed company on the Bucharest Stock Exchange and in compliance with the company’s financial calendar, we can only discuss about the results related to the first nine months of 2018, which were published on November 14th 2018. The evolution of the results of the company indicates a positive and ascending trend compared to the same period of the previous year. At a similar production, SNN obtained a profit of 320.996 million lei over the first 9 months, with 28,30% higher than the similar period of last year. The profit increase was generated by the EBITDA increase of 13% compared to 2017 9M, mainly due to the increase of operation income with 12% influenced by the 11% increase of the energy sale price. In the context of the full market liberalization, starting with January 1st 2018, SNN sold 18% more energy on the competitive market of bilateral contracts, where the price increased by 22% (price without Tg), while the quantity of energy sold on the spot segments of the market (DAM and IM) decreased by 27% with a decrease in price as well. The behavior of the market in the first nine months of 2018 was influenced by the sky rocketing price during the winter of 2017-2018 and the summer of 2018 which determined the energy traders to have a more prudent and long term approach, thus increasing the participation in the forward market which plays to the advantage of SNN as a long term producer.
Concerning the investment program of 244.867 thousand lei for 2018, the value completion degree for the first nine months of 2018 is of 47,6% compared to 26.7% in the first nine months of 2017. The value completion percentage differs from the actual completion and is determined by savings done compared to the planned budget, if the project is completed under budget. The largest portion of the investment program is represented by long term investments (under execution).
What is the SNN’s main source of revenue?
Nuclearelectrica is a baseload energy producer, which sells its entire production on the domestic energy market, completely liberalized since January 1st 2018. For the first nine months of 2018, the sales revenues was in amount of RON 1.519 million compared to 1.366 million in the first nine months of 2017. SNN’s PNL is also affected by the evolution of the foreign currency exchange rate. The impact for the first nine months of 2018 was a financial income of RON 65 million, compared to a loss of 47 million in the similar period of 2017.
What can you tell us about securing the raw material for the company, namely uranium dioxide powder (UO2)?
As a baseload energy producer with an important contribution to the energy security of Romania, Nuclearelectrica is interested in securing long term and predictable raw material supply, which means that we have carefully analyzed and consulted independent experts on the best strategy to diversify our sources, so as to avoid the dependency on a sole supplier. The shareholders of SNN adopted the best scenario for the diversification of raw material sources which entails a gradual transition from uranium dioxide currently used to uranium octoxide, which is more easily accessible on the international market under the technical specifications that Nuclearelectrica requires. The uranium octoxide powder will be processed by Feldioara branch belonging to the National Uranium Company. In order to cover the current and short term needs of the company, the strategy also provided the conclusion of two framework agreements with the two qualified uranium dioxide suppliers for a period of 36 months, following that the deliveries be performed based on a competitive price comparison for each purchase order issued by SNN. Following the adoption of these strategic directions by SNN’s shareholders, on 26.07.2018, the Law no. 193/2018 regarding the integrated raw material supply chain in Romania came into force, which regulates the procurement of raw material from the National Uranium Company at a fixed price as long as CNU has raw material available. The law does not come into any conflict with Nuclearelectrica’s long term diversification strategy as CNU and Feldioara branch are key elements in the transition process with clear responsibilities for the qualification of U3O8 suppliers and processing services. In compliance with this law and with the signed framework agreement, Nuclearelectrica issued a purchase order to CNU for the quantity of 62.500 kg of uranium dioxide, concluded on November 15th, at a market price of 388 lei/kg, thus securing its consumption needs and contributing to the integrated nuclear fuel cycle in Romania. As mentioned in the current report issued to the capital market on this occasion, after the establishment of the regulated price by the authorities, as per the provisions of Law no. 193/2018, SNN will procure UO2 from CNU at a regulated price and depending on the raw material available at CNU.
What are Nuclearelectrica’s objectives for 2019?
In 2019, Nuclearelectrica plans to continue the major projects with significant impact on the energy security of Romania: the refurbishment of Unit 1 in compliance with the planned development schedule and Units 3 and 4, in compliance with the revised implementation strategy. First and foremost, our commitment is to maintain the same high level of nuclear safety and reliability in operation which are guaranteed by a solid investment and maintenance program and a highly skilled staff. Romania, with its two operating units in Cernavoda are ranked first worldwide based on the since in service capacity factor. Our financial performance is closely tied to the evolution of the energy market, on which Nuclearelectrica sells its energy. To offset the unpredictable evolution of the market, we will rely on a flexible energy sales strategy and we will seek to diversify our income sources and our portfolio. Connected to all these objectives and a sine qua non condition for the success of any project is the continuous development of our staff through efficient attraction and retention strategies, which we will further in 2019.
Tell us briefly about Nuclearelectrica’s policy on investments in nuclear security. What was the impact of creating the Directorate for Investments in your organisation early this year?
It is a hands-on approach on investments and I considered it to be a must have. We have current investments, mostly in nuclear safety, and major, strategic investment projects, on long-term, which evidently involves extremely well thought planning. The need to establish the Investment Division within the company addressed mainly this well-thought out planning: timelines, stay-in budget, allocated human resources, inter-departmental connections to bring together all the capabilities required by a certain investment projects.
You were saying, in an interview published by News.ro in April, that you will set up a structure to monitor and improve technical efficiency. What can you tell us about this project?
Nuclear industry strongly requires oversight, both internally and independently. It is a strategic function that ensures a double checking of every aspect regarding operation and production. It is a safety back up! It is not about a lack of technical efficiency per se, but about operating with 100% certainty and increasing efficiency where possible. It has a spin-off effect through the entire organization as safety and efficiency are our development trigger on the long-run.
What is the stage of the negotiations with China General Nuclear Power on building the no.3 and no.4 nuclear reactors?
We are negotiating the Articles of Incorporation and the Investors Agreement to set up the new project company. This is the last stage of negotiations. I am hoping in a faster pace as recently the company’s shareholders approved the revised strategy. One of the important aspects related to the revision is a clear demarcation line between SNN’s responsibilities and those of the Romanian State.
The SNN announced at the end of October that it will start the refurbishment of reactor no.1 of the Cernavoda nuclear powerplant. It is undoubtedly one of the company’s most important investment projects. What other major projects are you planning?
Actually, the first phase of the project was approved by the shareholders shortly after my arrival at SNN, last year. Currently, we are in full progress with phase 1, phase that involves logistics, technical analysis, the completion of the Feasibility Study by 2021. We are both on time and on budget.
The other project that I am keen to implement is the detritiation installation, that is the removal of tritium from the heavy water and moderator. Not only that this will have a major positive impact on the duration of the refurbishment of Unit 1, also on the duration of the planned outages, they will be shorter, so we are talking efficiency increase, but also a positive financial impact since we are planning to commercialize the removed tritium. This a double-edged strategic project! It is already approved by the shareholders so we move forward with the development of the project itself. My timeline: in time for the refurbishment of Unit 1.
Against the backdrop of the European decarbonisation policies, specialists are saying that Nuclearelectrica is part of the solution to ensure the stability of the national energy system, the security of supply and the fulfilment of the environment targets, including bringing carbon emission down to zero by 2050. Tell us a few words about this aspect.
Nuclear energy is a huge component of decarbonization! I am saying this because I know the impact of what we operate. So far, since commissioning, we have avoided the release of 150 million tones of CO2! MIT is saying this loud and clear based on their recent study! Meeting decarbonization targets, which are quite ambitious: 40% reduction in CO2 emissions by 2030, 85% by 2050, requires, and I quote MIT, a “firm” source as nuclear energy. We could develop renewables, but we need 24/7 availability and stability of the energy system. One cannot have one without the other if we are to talk about efficient decarbonization!
What can you tell us about the management of nuclear waste?
As it regards SNN, the burnt fuel, fuel removed from the reactor, is stored, in perfectly safety conditions, for a six-year period in the fuel pool located within the nuclear power plant and afterwards it is removed from the pool and stored into the Intermediary Spent Fuel Repository, on the power plant site for 50 years. The storage is 24/7 live monitored by the AIEA. The Intermediary Spent Fuel Repository is one of our major gradual investment projects, one module per year, and it can accommodate the spent fuel from both operating units , 1 and 2, and from the future units, 3 and 4.
As it regards, the final storage, as per the legislation, AN&DR is responsible. SNN is paying a 2 Euro/MWh contribution to AN&DR for the final storage and decommissioning.
Nuclearelectrica is listed on the Bucharest Stock Exchange. Tell us about the company’s results on the stock exchange. What is the trend of SNN shares?
Ascending! SNN share price has gradually increased in 2017 and 2018. We understand management accountability full-sense, therefore we act bidirectional: for the growth of the company, all processes included, and for the interest of our shareholders. From corporate governance to operation and everything in between. I am always in the shoes of my colleagues and my shareholders!
A summit of energy ministers from South East Europe recently took place in Bucharest. The lack of qualified personnel in the nuclear energy sector was among the topics debated. Energy Minister Anton Anton said: “In what concerns nuclear energy, the deficit of trained personnel is a catastrophe.” Is Nuclearelectrica facing this problem? What solution do you envisage?
The migration trend towards nuclear new build is a global one, therefore a concern for everyone. Experts are the core of any organization, all the more in the nuclear energy. I am doing everything in my power to retain the skilled personnel, to motivate them through adequate human resources strategies. As much as possible, because we also have to comply with the related legislation.
Nuclearelectrica is facing this issue, with no significant impact. However, the purpose is to have the Romanian experts work for Romania. On the other hand, the level of wages in UAE or China is 4 or 5 times higher than in Romania, for similar positions. Given the economic differences is quite challenging to retain all of them.
We are also working full-time on recruiting young people and start nuclear training for a new generation. We need, so we act accordingly, constant human competence!
The Energy Ministry has published the Energy Strategy 2018-2030 with outlook for 2050. Several environmental organisations are asking that it be revised because it does not respect European commitments and promotes an energy mix based on fossil fuels and nuclear energy. Romania’s renewable energy potential is neglected, the organisations say, according to www.green-report.ro. What is your opinion?
I appreciate any preoccupation for the environment! We do it at SNN every day, so I can relate to this. However, the idea that an entire energy system could function on renewables alone is not realistic. Firstly, I am not aware of any European regulation impeding energy mixes based on coal and nuclear, on the contrary, it is every member state’s prerogative to best use its resources. Secondly, nuclear is all about environmental protection, that is why it is considered a big part of the decarbonization mix, and coal based facilities comply with the European provisions in terms of environmental protection. Also, it is interesting to remember that on both high summer temperatures or, on the contrary, freezing temperatures, the Romanian energy system heavily relied on nuclear and coal. Availability and capacity factors make the difference between what we ideally want and what we need. Black-outs are no option!