3 ms·

The government isn't paying to build it. They are only providing loan guarantees, not actual money. And they only have to pay to shut it down if a future gover

by phire 4y ago

The government isn't paying to build it. They are only providing loan guarantees, not actual money. And they only have to pay to shut it down if a future government forces it to shut it down before the plant stops being commercially viable. The main purpose of both guarantees is to make it much easier for nuclear reactors to get commercial funding from private banks.

ncmncm 4y ago
- phire 4y ago
  They are theoretical money that might become real money in the future. They don't cost the government anything unless a power plant fails and defaults on it's loans. And even the it's not the full $40 billion. Just the shortfall between what the bank can recover and the cost of the loan. And if the project got anywhere near completely, there should still be a nuclear power plant. Given that one of the bigger risks to nuclear power plans are changing government regulations, it's actually a pretty low risk loan guarantee for the government to make. There is a decent chance they will never have to activate the guarantee. > Or, how would you like to provide me loan guarantees? They won't cost you anything. Right? I mean... What are you taking a loan out on? how does it benefit me? What are the risks of you defaulting? Why is my risk assessment different from the bank? In the case of a default, what is the shortfall likely to be? With the right answers to those questions, it might be in my interests to guarantee a loan for you.
  - cycomanic 4y ago
    > They are theoretical money that might become real money in the future. > They don't cost the government anything unless a power plant fails and defaults on it's loans. And even the it's not the full $40 billion. Just the shortfall between what the bank can recover and the cost of the loan. I can't believe we are having this discussion on HN. Are you seriously implying loan guarantees are free? > And if the project got anywhere near completely, there should still be a nuclear power plant. Except that is not guaranteed. Historically speaking nuclear power plants have been going massively over budget. So the one thing that seems guaranteed is that the government has to guarantee even more loans. > Given that one of the bigger risks to nuclear power plans are changing government regulations, it's actually a pretty low risk loan guarantee for the government to make. Point me to any case where changing government regulations were a significant risk for nuclear power plants. The main risk is that the build goes massively over budget (like what is happening with pretty much every build in recent history), which will make it much more difficult to recover the cost. >There is a decent chance they will never have to activate the guarantee., So if that is the case why do they need it? Private investors should be all over it. The reality is, the risk is high for questionable return. That is why they need the government to step in.
cycomanic 4y ago
> The government isn't paying to build it. They are only providing loan guarantees, not actual money. Loan guarantees are actual money, especially if the builder defaults. > The main purpose of both guarantees is to make it much easier for nuclear reactors to get commercial funding from private banks. So ask yourself why will commercial funders not give money to the builds, while they are perfectly happy for solar/wind?
- munch117 4y ago
  Never the less, the financing strategy works. At least in Scandinavia. Defaulting happens rarely enough to not be an issue. Well-run governments can borrow money much cheaper than private actors. Lower interest rates means a higher chance of success for a long-running project.
- phire 4y ago
  Its theoretical money, not actual money. A potential future cost. It only becomes actual money if there is a default. And in most default scenarios, the government wouldn't have to pay the full $40 billion. Just the shortfall between the foreclosure sale price and the remaining loan amount. > So ask yourself why will commercial funders not give money to the builds, while they are perfectly happy for solar/wind? First, Solar/wind projects are typically smaller. Less risky to do hundreds or thousands of small projects, spread out over country (or world). The chance of all the projects defaulting at once are small. Second, one of the biggest risk to nuclear projects are government related. The risk that they might introduce expensive new regulations. Or that the general population (who are typically anti-nuclear) might vote a new anti-nuclear government into power. By having the current government guarantee the loans, future governments will be motivated to not mess with them. Third, you can't always trust commercial funders to do what's best for the nation, especially from a national security perspective. They might (for example in Germany) decide to rely on cheap natural gas imports from Russia as the primary source of energy, assuming that Russia will always be a stable source of energy forever, and would never start randomly invading it's neighbors.

by phire 4y ago

ncmncm 4y ago

phire 4y ago
They are theoretical money that might become real money in the future. They don't cost the government anything unless a power plant fails and defaults on it's loans. And even the it's not the full $40 billion. Just the shortfall between what the bank can recover and the cost of the loan. And if the project got anywhere near completely, there should still be a nuclear power plant. Given that one of the bigger risks to nuclear power plans are changing government regulations, it's actually a pretty low risk loan guarantee for the government to make. There is a decent chance they will never have to activate the guarantee. > Or, how would you like to provide me loan guarantees? They won't cost you anything. Right? I mean... What are you taking a loan out on? how does it benefit me? What are the risks of you defaulting? Why is my risk assessment different from the bank? In the case of a default, what is the shortfall likely to be? With the right answers to those questions, it might be in my interests to guarantee a loan for you.
- cycomanic 4y ago
  > They are theoretical money that might become real money in the future. > They don't cost the government anything unless a power plant fails and defaults on it's loans. And even the it's not the full $40 billion. Just the shortfall between what the bank can recover and the cost of the loan. I can't believe we are having this discussion on HN. Are you seriously implying loan guarantees are free? > And if the project got anywhere near completely, there should still be a nuclear power plant. Except that is not guaranteed. Historically speaking nuclear power plants have been going massively over budget. So the one thing that seems guaranteed is that the government has to guarantee even more loans. > Given that one of the bigger risks to nuclear power plans are changing government regulations, it's actually a pretty low risk loan guarantee for the government to make. Point me to any case where changing government regulations were a significant risk for nuclear power plants. The main risk is that the build goes massively over budget (like what is happening with pretty much every build in recent history), which will make it much more difficult to recover the cost. >There is a decent chance they will never have to activate the guarantee., So if that is the case why do they need it? Private investors should be all over it. The reality is, the risk is high for questionable return. That is why they need the government to step in.

cycomanic 4y ago

> The government isn't paying to build it. They are only providing loan guarantees, not actual money. Loan guarantees are actual money, especially if the builder defaults. > The main purpose of both guarantees is to make it much easier for nuclear reactors to get commercial funding from private banks. So ask yourself why will commercial funders not give money to the builds, while they are perfectly happy for solar/wind?

munch117 4y ago
Never the less, the financing strategy works. At least in Scandinavia. Defaulting happens rarely enough to not be an issue. Well-run governments can borrow money much cheaper than private actors. Lower interest rates means a higher chance of success for a long-running project.
phire 4y ago
Its theoretical money, not actual money. A potential future cost. It only becomes actual money if there is a default. And in most default scenarios, the government wouldn't have to pay the full $40 billion. Just the shortfall between the foreclosure sale price and the remaining loan amount. > So ask yourself why will commercial funders not give money to the builds, while they are perfectly happy for solar/wind? First, Solar/wind projects are typically smaller. Less risky to do hundreds or thousands of small projects, spread out over country (or world). The chance of all the projects defaulting at once are small. Second, one of the biggest risk to nuclear projects are government related. The risk that they might introduce expensive new regulations. Or that the general population (who are typically anti-nuclear) might vote a new anti-nuclear government into power. By having the current government guarantee the loans, future governments will be motivated to not mess with them. Third, you can't always trust commercial funders to do what's best for the nation, especially from a national security perspective. They might (for example in Germany) decide to rely on cheap natural gas imports from Russia as the primary source of energy, assuming that Russia will always be a stable source of energy forever, and would never start randomly invading it's neighbors.