SPECIAL EDITION"The distribution of 90% of the profit does not affect the investment program of Nuclearelectrica"

Translated by Cosmin Ghidoveanu
English Section /

"The distribution of 90% of the profit does not affect the investment program of Nuclearelectrica"

The distribution to the state of 90% of the profit does not affect the investment program of Nuclearelectrica, said Cosmin Ghiţă, the interim CEO of the company. He told us, in an interview, that the performance of the Cernavodă plant, operated by Nuclearelectrica, when it comes to the rate of forced losses, is among the best in the chart of the about 400 reactors in the world, and from the point of view of the median life capacity of the plant, the Cernavodă nuclear plant and Romania rank first in the world. According to Cosmin Ghiţă, the company he leads is in the final stage of the procedure as far as China General Nuclear Power is concerned, when building the reactors 3 and 4 of Cernavodă, namely, the negotiation of the Articles of Incorporation and of the Investor Agreement.

Starting with November 6th, Cosmin Ghiţă holds a new temporary term for four months at the helm of the company.

Interview with Mr. Cosmin Ghiţă, interim CEO of Nuclearelectrica

"The company never reached the number of hours of unplanned downtime scheduled for a year"

Reporter: What is the status of the negotiation of the memorandum with the Chinese party and to what extent the administrators of Nuclearelectrica see the granting of state guarantees for the investment in the two reactors of Cernavodă?

Cosmin Ghiţă: We are at the final stage of the procedure, namely the negotiation of the Articles of Incorporation and of the Investor Agreement, essentially the documents of the investment, for the creation of the new project company, a JVCo in which, according to the Strategy for the continuation of the project of Units 3 and 4, launched by the Romanian government in 2014, the majority shareholder, the selected investor CGN (China General Nuclear Power Corporation), will hold at least 51% of the shares. The contribution of SNN and of the Romanian state in the project company will be the assets that exist at the Cernavodă nuclear plant location and the heavy water reserves.

Once the new project company is created, the structure of the funding will be decided, as the Romanian state will play an active role from that point of view.

Reporter: What is the current stage of the investments made this year in the branches of Cernavodă and Piteşti?

Cosmin Ghiţă: As you well know, SNN is a public company, which needs to publish reports by certain dates, in line with the financial schedule posted in the beginning of the year. The reporting for the third quarter of 2018 will be done on November 14th. Prior to this date, the information will not be made public, but the degree of completion of the investment projects will be presented in the report.

As for the project for the retooling of Unit 1, there is a clearly structured schedule of activities, based on the three development stages, until the December 2026, when the actual retooling will begin. The retooling of a nuclear unit is an extremely complex project, which requires preparation, staging based on long periods of time, dedicated human resources and the full keeping of the timetable.

We are in the first stage, when the technical analyses are being conducted, the logistic structure is being established, and at its end, in 2021, the Feasibility Study will be achieved. The result is another 30 years of operation at less than half the costs of a new nuclear reactor, the process in itself, in terms of complexity, having similarities with the commissioning of a new reactor.

Reporter: Concerning the involvement in the Tarniţa project - what are the expectations of Nuclearelectrica, as no decision has been made on a government level concerning the making of the Tarniţa hydroelectric plant? The thinks the investment in Tarniţa is profitable. If yes, what is this presumption based on? The Return on Equity (ROE), Internal Rate of Return (RIR) or another indicator?

Cosmin Ghiţă: Any involvement by SNN in a project is obviously the decision of its shareholders. So far, this aspect hasn't been discussed. The appreciation of the profitability of a project is made on the basis of data we do not have, so we can't make that kind of assessment.

Reporter: Does the company plan to change its corporate governance code? If yes, what will those changes be?

Cosmin Ghiţă: Since the moment of its listing, SNN has been applying the principles of corporate governance. It is an essential aspect for any listed company. A good corporate governance means a responsible, assumed management, which acts both with the goal of developing the company, as well as in the interest of its shareholders and represents a criterion for the evaluation of the company by the market participants. Obviously we will continue to improve constantly, without doing just the bare minimum required by the laws on corporate governance. We are interested in the passing and implementation of good international practices, the assimilation into the international trend of corporate governance principles, so that we satisfy the interest of all the shareholders and investors. When I say governance I am referring to a responsible management act, the management of risks, internal audit and control, total transparency, the relationship with investors, the ethics and integrity code at the level of the entire company, communication as such towards all of our partners. For all of that there are procedures at the company level and orientation towards constant improvement.

Reporter: To what extent did the selection system and the frequency of the replacements on the board of directors affect the results of Nuclearelectrica?

Cosmin Ghiţă: Starting with September 28th 2018, according to the decision of the shareholders, SNN has a Board of Directors with a four year term, by 2022, selected following a compliance procedure in line with Emergency Government Ordinance 109/2011. Previously, there were also appointments and extensions, in line with the applicable legislative, to ensure the administrative management of the company until the completion of the selection procedure.

There were no negative consequences on the company's financial results. From a financial point of view, the profit for the first semester of 2018 (the most recent reporting) is 16% higher than the one seen in the previous period of last year, the EBITDA is up 10%, the degree of investment realization is 10% higher over the first semester of 2017, the stock price is up, and, operationally, the same performance on an international level in terms of nuclear security being one of the most effective nuclear plants on a global level.

Reporter: In 2018 there have been several disruptions of the system or it has operated at low capacity. What are the causes of these shutdowns? Do they have anything to do with the age or the moral decay of certain installations and subsystems that need urgent repairs and modernization? Is there a risk that in the coming period these incidents would remain just as high?

Cosmin Ghiţă: Unplanned stops are specific to any industry. Unplanned stops are not incidents. These do not represent a major problem, they do not involve operating risks and/or nuclear security risks in itself, but instead they appear at the moment of the need to execute maintenance repairs on various components of the classic part of the plant. The shutdown decisions are made in compliance with the nuclear security norms and procedures applicable in that kind of situations. Unlike a conventional plant, in a nuclear plant the conducting of maintenance parts on the classic side involves, in certain cases, that they be done with the reactor shut down, which is an operating standard for nuclear security. The power reduction is also necessary sometimes for repairs or part replacements, but the reactor is connected to the grid, 100% functional.

The response in the event of a necessity of intervention of different systems, equipment, components is in compliance with the specific response procedures to such situations.

Every year, a number of unplanned hours of unplanned shutdowns is estimated, about 300, which the SNN has never reached, which are appropriately budgeted. There have been years where we have had one or two shutdowns and years where there have been several, but like in any industry, there are periods where there are more repair works than usual are needed. Statistically, compared to the traditional limit in the industry, the one seen by SNN is far lower.

I am going to give you examples of industry specific indicators, even though they are very technical, but relevant through the causality relationship: one of the important performance indicators which are used in the nuclear industry is the rate of forced output losses. That indicator influences another important indicator, the median lifetime capacity of the plant.

The performance of CNE Cernavodă as far as the forced losses ratio is concerned is among the best in the hierarchy of the 400 reactors of the world, and the indicator of median lifetime capacity of the plant puts CNE Cernavodă and Romania in the top spot in the world.

Reporter: How does the investment program affect the decision of the Romanian government to take over at least 90% of the profits of public companies to be distributed as dividends to shareholders?

Cosmin Ghiţă: A distribution rate of 90% does not affect the investment program of SNN. The same rate has been applied to the 2017 financial year without any negative impact on the investment projects.

Reporter: What is your relationship with the local public administration in Cernavodă and the degree of involvement of Societatea Naţională "Nuclearelectrica" S.A. in the local community?

Cosmin Ghiţă: The relationship is one of cooperation, as is natural for it to exist in a community with a nuclear plant. Over time, SNN has gotten actively involved in increasing the welfare level of the community, as it is the operator of programs approved through a government decision: the social program, of which I would mention - hospital and policlinic dispensary, kindergarten, potable water station, heating grid, the Saint Mary Bridge, high school, the modernization of crossroads and streets.

The residents of Cernavodă benefit from heating at the lowest price in the country, we make significant contributions to the local budget which naturally go back into the community through investments.

We also have a program of communication and consulting of the community because we are interested directly in offering complete and totally transparent information and identifying the problems, concerns and interests of the community.

Reporter: Thank you!

Recorded by ANDREI IACOMI

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