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    US-Korea Nuclear Roundtable
    Developing and Financing NPPs: Thoughts on Reputational Risk
    January 31, 2014

    The huge capital costs and long development/construction periods associated with nuclear power plant construction present significant challenges in the financing of such projects. Although return on investment will always be a fundamental concern for any financial institution, lenders for NPP projects will also necessarily consider reputational risk—environmental and social considerations, commitment to international nuclear obligations, and reliability and experience of the nuclear regulator—as a factor in their decisions. Of particular concern for lenders is nuclear regulator capability; the nuclear regulatory agency for the country in question should be independent, experienced, competent, and authoritative. Often, lender confidence in a state regulator will be the prime factor in decisions to finance a particular NPP construction project. One of the reasons why the regulatory factor is so important is that regulators are the major implementers of international best practices—for instance, while the IAEA provides direction on safety, security, and safeguards, such guidelines are not codified in international laws or mandates. Therefore, enforcing international standards for NPPs will often be the sole responsibility of the national nuclear regulator. Regulator experience is also a significant consideration for lenders, which presents some challenges for financing NPPs in new markets. Often, entrant states will have to mitigate regulatory inexperience through hiring international advisors, leveraging bilateral relationships and diplomatic connections, etc.