CELEX: 51982PC0793
Language: en
Date: 1982-12-07 00:00:00
Title: Recommendation for a COUNCIL DECISION on the position to be adopted by the Community in the international negotiations on conditions governing officially-supported export credits for nuclear power stations (submitted to the Council by the Commission)

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COM (82) 793
Vol. 1982/0239
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 ---pagebreak---                                                                COΜ(82)793 final
             ' .S -. ION                                       Brussels , 7 December 1982
           r    THE
EUkuPEAH COMMUNITIES                                           FOR OFFICIAL USE ONLY
    Generol Secretariat
                                     Recommendation for a
                                       COUNCIL DECISION
   on the position to be adopted by the Community in the international negoti­
      ations on conditions governing officially-supported export credits for
                                    nuclear power stations
                         ( submitted to the Council by the Commission )
    C0MC82 ) 793 final
 ---pagebreak---                             EXPLANATORY MEMORANDUM
I.     BACKGROUND
1.    The new Arrangement (" Consensus") on export credits which came into force
on 6 July provides that the participants shall open negotiations for an
agreement on export credit terms for nuclear power stations .
2.    Nuclear power stations are not covered by the Consensus ;  instead , this
sector has teen governed since 1975 by a " standstill" agreement within the
OECD, whereby participants undertake not to offer credit terms more favourable
than those obtaining in 1975 *
3 . ' There has already been a series of exploratory talks on nuclear power
stations , including two recent meetings of experts at the OECD .    The matter
has also been discussed in detail within the Community .
4.    Pursuant to the undertaking given by Consensus participants , the Commission
hereby recommends that the annexed directives be adopted for negotiations on
nuclear power stations .
                                                                               «
II .   THE MARKET
                                                                          »
5.    The nuclear sector expanded rapidly in the 1970s , on the strength of the
ambitious plans for the growth of nuclear power in OECD countries .     In 1970,
it was estimated that total installed nuclear generating capacity in . those
countries , which then stood at 1 6 GWE, would reach almost 300 GWE in 1980 .
In the event , however , it had barely risen beyond 130 GWE by the end of 1981 .
This yawning gap between forecast and actual development is at the root of
today 's overcapacity in the nuclear industry .
6.    Given this generalized overcapacity, the position of any national nuclear
industry depends ( a) on the development of the domestic energy sector and
 (b ) on export orders .
 ---pagebreak---                                      - 2 -
This dependence of the industry on domestic energy programmes is well
illustrated in the United States , where a spate of cancellations of nuclear
power station projects has driven the companies to an increasingly desperate
search for export orders .
The situation of the nuclear industry of Community countries is fundamentally
the same .      *
7 . The majority of new orders will "be coming from OECD countries , but orders
from developing countries are also likely to increase . Clearly ,
with the industry in a state of manifest overcapacity worldwide , there will
be all–out competition for export orders from developing countries or non-
producing OECD members .
8. Only a small number of countries export nuclear equipment - currently seven
in all , three of them Community Member .States .
III .  THE COMMISSION 'S RECOMMENDATIONS
9. In the light of the exploratory talks ( see point 3 ) it appears that the
negotiations will probably centre on two issues : maximum repayment terms , ♦
and minimum interest rates .
( a) The United States , the world leader in the nuclear construction industry,
      advocates extremely long-term credits - 15 or 20 years .     Repayment terms
      of this sort can be financed on the US capital market , but would cause
      serious difficulties for European manufacturers , who lack access to similar
      facilities .    It must be borne in mind that the construction of a nuclear
      power station can take eight years or more , and repayment of export credit
      will hot begin until after that .     The Commission therefore regards the
      sort of repayment terms envisaged by the USA as unacceptable .     However ,
      there seems little prospect of agreement being reached if the Community
,     is not prepared to go beyond the general ten-year limit laid down in the
      Consensus .    It therefore recommends that for nuclear power stations a
      twelve-year limit be set , the same as the maximum repayment term
      prescribed in the Consensus for conventional power stations .
 ---pagebreak---  (b ) As far as interest rates are concerned, some countries outside the
       Community feel they should "be set with reference to a "benchmark"
       rate , i.e. the rate prevailing at the time when construction is
       completed. This would make it impossible for the exporter , when
       negotiating with the customer, to say what the actual interest
       rate would be.    But the customer has to "be able to work out what
       export credit will cost , so there should be a set rate known in
       advance.   In the Commission 's view the Consensus minimum rates
       also provide a suitable point of departare : for deciding on the
       rates to be available for financing the sale of. nuolear power
       stations .  In order to take account of the different economic
        situations of purchasing countries the Commission would also
        recommend that the minimum rates should be differentiated according
       to the country classifications as defined in the Consensus .
       Furthermore     the sectoral agreement should follow the Consensus arrangements
       with respect to currencies whose , commercial interest rates axe
       lower than the agreed minimum rates.
 10.   There remains nevertheless a considerable gap between the Community 's
position and that of certain other participants especially the US and Canada ,
 who favour much longer repayment terms and are able at the moment to go up to .
 15 years under the current standstill.lt will thus be very difficult to arrive
 at an agreement on this question . In any case such an agreement is only ptossible
 if the Community agrees to participate in other measures which will tighten up
 yeneral discipline in this area and will contribute in a general way to reduce
 subsidies and diminish risk exposure . Such measures,in the Commission 's view^
should cover :
– period of validity of commitments ,
– cash payments ,
– local costs ,
– interest payable during construction period,
- tied aid credits ,
     /
– guarantee against cost escalation,
– additional costs notably insurance premiums ,
– financing the supply of nuclear fuel .
The recommended directives thus contain proposals on these points .
 ---pagebreak---                                          - 4 -
Obviously , each measures would have to form part of a package deal and
could only toe contemplated if they made it possible to come to a
comprehensive agreement .
11 *  If it still turns out to "be impossible for        participants to reach
an agreement in the near future along the Lines indicated above,pending
further efforts . to find a compromise,, an interim solution might.be envisaged
which would consist of trying to establish a suitable information and consultation
procedure to enable nuclear plant producers to take a common line on whatever
specific projects come up before the conclusion of the negotiations . The likelihood
of successof such a provisional solution might be enhanced by the fact that the
number of projects and competing countries is limited .
It should "be possible to achieve this , given the currently small numbers
of orders and competing countries concerned , "by making it mandatory for
participants intending to export a nuclear power station to use the
OECD 's EIS (exchange of information) system and requiring a certain amount
of advance notification.
12 . As regards the general clauses of the agreement , the Commission would
make the following recommendations :
                                                                                «
(a) Scope : nuclear core plus conventional parts. Any other arrangement
      would be impractical .                                   .             «
(b ) Other provisions should correspond to the Consensus rules , with
      regard, inter alia, to :
      - starting point of crédit ,
      – rna-H TmiTB amount of officially–supported financing,
      – matching and notification procedures (but see also point 11 ),
      – periodical review of credit terms.
 ---pagebreak---                                     - 5 -
12.  As regards the review of interest rates in particular , the
Commission's Communication to the Council (COM(:82)9 final ) of
January this year concerning the last round of Consensus negotiations
considered the feasibility of a system of M semi-automatio" adjustments.
The recent evolution of the capital markets has convinced the
Commission that such a system would undoubtedly have advantages for
the Community* It might be asked if such a system should not be introduced
into a future sectoral agreement .
 f
 ---pagebreak---                             Recommendation for a
                              COUNCIL DECISION
               on the position to be adopted by the Community
               in the international negotiations on conditions
               governing officially- supported export credits
               for nuclear power stations
THE COUNCIL OF THE EUROPEAN COMMUNITIES ,
Having regard to the Treaty establishing the European Economic Community^
and in particular Article 113 thereof,
Having regard to the Recommendation from the Commission ,
Whereas by Decision dated 28 July 1982 the Community accepted the results
of the negotiations on the modification of the Arrangement on Guidelines
for Officially Supported Export Credits and agreed in Annex II to that
Decision to open negotiations for agreements on export credit terms for
aircraft and nuclear power stations ;
Whereas in view of the situation of the world economy it remains necessary
to keep wasteful competition on officially-supported export credits to a
minimum , and to improve international cooperation in order to prevent a
deteriorat ion of such credit terms ;
 ---pagebreak--- HAS DECIDED AS FOLLOWS :
                                  Sole Article
In "the international negotiations on the conditions governing officially-
supported export credits for nuclear power stations , the Commission
shall express the Community's position in accordance with the
directives contained in the Annex .
It shall proceed in consultation with the Special Committee provided
for in Article 113 of the Treaty , which shall assist it in its task.
Done at Brussels ,                           For the Council
                                             The President
 ---pagebreak---                                                             ANNEX
NEGOTIATING! DIRECTIVES
1.    SCOFE
The credit "terms set oat "below shall apply to :
(a) the nuclear part of the power station, comprising the nuclear
      steam supply system (NSSS ) and the turbines , and
                  *                                *
(b ) the conventional part.
2.    DURAT! ON
The maximum repayment term shall be twelve years.
3.    INTEREST RATES
(a) Purchasing countries shall be classified in three groups , in
       *
      accordance with the definitions set out in the Consensus .
(b) Minimum interest rates should be of the same order of magnitude
      as the higher figure of the minimum rate bracket laid down in the
      Consensus for each class of country.
( c ) If the interest rate on commercial loans in the currency of a
      participating country is beneath the lowest level so established ,
      the rate of interest on wholly or partly officially-supported
      export credits must not be less than the commercial reference
      rate, plus a margin of 0.3 percentage points per annum .
                                                                           «
4.    OTHER CONDITIONS
(a) Commitments shall be valid for six months.
(b ) Cash payments shall be of the order of 20$.
( c ) Financing of local costs shall not be officially supported.
(d) Interest due for the period prior to the starting point of the
      credit shall not be capitalized.
( e ) The parts of a project covered by these terms ( see § 1 , "Scope")
      shall not be financed by tied aid credits.
( f ) Participants shall not provide guarantees against cost escalation.
(g) There shall be no waiver nor reduction of additional costs, notably insurance
    /
      and guarantee premiums .
(h ) Official support for the financing of the supply of nuclear fuel
      shall not extend beyond the first delivery and the maximum repayment
      term shall not exceed five years .
 ---pagebreak--- 5.  GENERAL PROVISIONS
Other provisions , including those relating to the starting point of
credit , the maximum level of official support for financing, matching
and notification procedures and the annual review shall he established
with reference to the terms of the Consensus .