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DOCUMENTS "COM"
COM(82)793
Vol.1982/0239

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'.S-.ION
rTHE
EUkuPEAH COMMUNITIES
GenerolSecretariatCOΜ(82)793 final
Brussels,7December1982
FOROFFICIAL USEONLY
Recommendation fora
COUNCILDECISION
onthepositiontobeadoptedbytheCommunityintheinternational negoti­
ationsonconditions governingofficially-supported exportcreditsfor
nuclearpowerstations
(submittedtotheCouncilbytheCommission )
C0MC82)793final

EXPLANATORY MEMORANDUM
I.BACKGROUND
1.ThenewArrangement("Consensus")onexportcreditswhichcameintoforce
on6Julyprovidesthattheparticipantsshallopennegotiationsforan
agreementonexportcredittermsfornuclearpowerstations.
2.NuclearpowerstationsarenotcoveredbytheConsensus;instead,this
sectorhasteengovernedsince1975bya"standstill"agreementwithinthe
OECD,wherebyparticipants undertakenottooffercredittermsmorefavourable
thanthoseobtainingin1975*
3.'Therehasalreadybeenaseriesofexploratorytalksonnuclearpower
stations,includingtworecentmeetingsofexpertsattheOECD.Thematter
hasalsobeendiscussedindetailwithintheCommunity.
4.Pursuanttotheundertaking givenbyConsensusparticipants ,theCommission
herebyrecommendsthattheannexeddirectivesbeadoptedfornegotiations on
nuclearpowerstations.
«
II.THEMARKET
»
5.Thenuclearsectorexpandedrapidlyinthe1970s,onthestrengthofthe
ambitiousplansforthegrowthofnuclearpowerinOECDcountries.In1970,
itwasestimatedthattotalinstallednucleargeneratingcapacityin.those
countries,whichthenstoodat16GWE,wouldreachalmost300GWEin1980.
Intheevent,however,ithadbarelyrisenbeyond130GWEbytheendof1981.
Thisyawninggapbetweenforecastandactualdevelopmentisattherootof
today'sovercapacity inthenuclearindustry.
6.Giventhisgeneralizedovercapacity ,thepositionofanynationalnuclear
industrydepends(a)onthedevelopmentofthedomesticenergysectorand
(b)onexportorders.

-2-
This dependence oftheindustry ondomestic energy programmes iswell
illustrated intheUnited States ,where aspate ofcancellations ofnuclear
power station projects hasdriven thecompanies toanincreasingly desperate
search forexport orders .
Thesituation ofthenuclear industry ofCommunity countries isfundamentally
thesame . *
7.Themajority ofneworders will "becoming from OECD countries ,butorders
from developing countries arealso likely toincrease .Clearly ,
with theindustry inastate ofmanifest overcapacity worldwide ,there will
beall–outcompetition forexport orders from developing countries ornon-
producing OECD members .
8.Only asmall number ofcountries export nuclear equipment -currently seven
inall ,three ofthem Community Member .States .
III .THE COMMISSION 'SRECOMMENDATIONS
9.Inthelight oftheexploratory talks (seepoint 3)itappears that the
negotiations will probably centre ontwoissues :maximum repayment terms ,♦
and minimum interest rates .
(a)TheUnited States ,theworld leader inthenuclear construction industry ,
advocates extremely long-term credits -15or20years .Repayment terms
ofthis sort canbefinanced ontheUScapital market ,butwould cause
serious difficulties forEuropean manufacturers ,wholack access tosimilar
facilities . Itmust beborne inmind that the construction ofanuclear
power station cantake eight years ormore ,andrepayment ofexport credit
will hotbegin until after that .TheCommission therefore regards the
sort ofrepayment terms envisaged bytheUSAasunacceptable .However ,
there seems little prospect ofagreement being reached ifthe Community
, isnotprepared togobeyond thegeneral ten-year limit laid down inthe
Consensus . Ittherefore recommends that fornuclear power stations a
twelve-year limit beset ,thesame asthemaximum repayment term
prescribed intheConsensus forconventional power stations .

(b)Asfarasinterest rates areconcerned ,some countries outside the
Community feel they should "besetwith reference toa"benchmark "
rate ,i.e. therate prevailing atthetime when construction is
completed .This would make itimpossible fortheexporter ,when
negotiating with thecustomer ,tosaywhat theactual interest
rate would be.But the customer has to "beable towork outwhat
export credit will cost ,sothere should beasetrate known in
advance .Inthe Commission 'sview the Consensus minimum rates
also provide asuitable point ofdepartare :fordeciding onthe
rates tobeavailable forfinancing thesale of .nuolear power
stations .Inorder totake account ofthe different economic
situations ofpurchasing countries theCommission would also
recommend that theminimum rates should bedifferentiated according
tothecountry classifications asdefined intheConsensus .
Furthermore thesectoral agreement should follow theConsensus arrangements
with respect tocurrencies whose ,commercial interest rates axe
lower than theagreed minimum rates .
10.There remains nevertheless aconsiderable gapbetween theCommunity 's
position andthat ofcertain other participants especially theUSandCanada ,
whofavour much longer repayment terms andareable atthemoment togoupto.
15years under thecurrent standstill.lt will thus bevery difficult toarrive
atanagreement onthis question .Inanycase such anagreement isonly ptossible
iftheCommunity agrees toparticipate inother measures which will tighten up
yeneral discipline inthis area andwill contribute inageneral waytoreduce
subsidies anddiminish risk exposure .Such measures,in theCommission 'sview ^
should cover :
–period ofvalidity ofcommitments ,
–cash payments ,
–local costs ,
–interest payable during construction period ,
-tied aidcredits ,
/
–guarantee against cost escalation ,
–additional costs notably insurance premiums ,
–financing thesupply ofnuclear fuel .
Therecommended directives thus contain proposals onthese points .

-4-
Obviously ,each measures would have toform part ofapackage deal and
could only toecontemplated ifthey made itpossible tocome toa
comprehensive agreement .
11*Ifitstill turns outto "beimpossible for participants toreach
anagreement inthenear future along theLines indicated above,pending
further efforts .tofind acompromise ,,aninterim solution might.be envisaged
which would consist oftrying toestablish asuitable information andconsultation
procedure toenable nuclear plant producers totake acommon line onwhatever
specific projects come upbefore theconclusion ofthenegotiations .Thelikelihood
ofsuccessof such aprovisional solution might beenhanced bythefact that the
number ofprojects andcompeting countries islimited .
Itshould "bepossible toachieve this ,given thecurrently small numbers
oforders andcompeting countries concerned ,"bymaking itmandatory for
participants intending toexport anuclear power station tousethe
OECD'sEIS (exchange ofinformation )system andrequiring acertain amount
ofadvance notification .
12.Asregards thegeneral clauses oftheagreement ,theCommission would
make thefollowing recommendations :
«
(a)Scope :nuclear core plus conventional parts .Anyother arrangement
would beimpractical . . «
(b)Other provisions should correspond totheConsensus rules ,with
regard ,inter alia ,to:
-starting point ofcrédit ,
–rna-H TmiTBamount ofofficially –supported financing ,
–matching andnotification procedures (butseealsopoint 11),
–periodical review ofcredit terms .

-5-
12.Asregards thereview ofinterest rates inparticular ,the
Commission 'sCommunication totheCouncil (COM(:82)9 final )of
January this year concerning thelast round ofConsensus negotiations
considered thefeasibility ofasystem ofMsemi-automatio "adjustments .
Therecent evolution ofthecapital markets hasconvinced the
Commission that such asystem would undoubtedly have advantages for
theCommunity *Itmight beasked ifsuch asystem should notbeintroduced
into afuture sectoral agreement .
f

Recommendation for a
COUNCIL DECISION
ontheposition tobeadopted bytheCommunity
intheinternational negotiations onconditions
governing officially -supported export credits
fornuclear power stations
THECOUNCIL OFTHEEUROPEAN COMMUNITIES ,
Having regard totheTreaty establishing theEuropean Economic Community ^
andinparticular Article 113thereof ,
Having regard totheRecommendation from theCommission ,
Whereas byDecision dated 28July 1982 theCommunity accepted theresults
ofthenegotiations onthemodification oftheArrangement onGuidelines
forOfficially Supported Export Credits andagreed inAnnex IItothat
Decision toopen negotiations foragreements onexport credit terms for
aircraft andnuclear power stations ;
Whereas inview ofthesituation oftheworld economy itremains necessary
tokeep wasteful competition onofficially-supported export credits toa
minimum ,andtoimprove international cooperation inorder toprevent a
deteriorat ionofsuch credit terms ;

HAS DECIDED ASFOLLOWS :
Sole Article
In "theinternational negotiations ontheconditions governing officially -
supported export credits fornuclear power stations ,theCommission
shall express theCommunity 'sposition inaccordance with the
directives contained inthe Annex .
Itshall proceed inconsultation with theSpecial Committee provided
forinArticle 113oftheTreaty ,which shall assist itinitstask .
Done atBrussels , FortheCouncil
The President

ANNEX
NEGOTIATING !DIRECTIVES
1.SCOFE
Thecredit "terms setoat "below shall apply to:
(a)thenuclear part ofthepower station ,comprising thenuclear
steam supply system (NSSS )andtheturbines ,and
* *
(b)theconventional part .
2.DURAT !ON
Themaximum repayment term shall betwelve years .
3.INTEREST RATES
(a)Purchasing countries shall beclassified inthree groups ,in
*
accordance with the definitions set out intheConsensus .
(b)Minimum interest rates should beofthesame order ofmagnitude
asthehigher figure oftheminimum rate bracket laid down inthe
Consensus foreach class ofcountry .
(c)Iftheinterest rate oncommercial loans inthecurrency ofa
participating country isbeneath thelowest level soestablished ,
therate ofinterest onwholly orpartly officially-supported
export credits must notbeless than thecommercial reference
rate ,plus amargin of0.3percentage points perannum .
«
4.OTHER CONDITIONS
(a)Commitments shall bevalid forsixmonths .
(b)Cash payments shall beoftheorder of20$.
(c)Financing oflocal costs shall notbeofficially supported .
(d)Interest duefortheperiod prior tothestarting point ofthe
credit shall notbecapitalized .
(e)Theparts ofaproject covered bythese terms (see§1,"Scope ")
shall notbefinanced bytied aidcredits .
(f)Participants shall notprovide guarantees against cost escalation .
(g)There shall benowaiver norreduction ofadditional costs ,notably insurance
/
and guarantee premiums .
(h)Official support forthefinancing ofthesupply ofnuclear fuel
shall notextend beyond thefirst delivery andthemaximum repayment
term shall not exceed five years .

5.GENERALPROVISIONS
Otherprovisions,includingthoserelatingtothestartingpointof
credit,themaximumlevelofofficialsupportforfinancing,matching
andnotificationproceduresandtheannualreviewshallheestablished
withreferencetothetermsoftheConsensus.