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Strategy& 1 PwC

Appendix 5: Next steps

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 4: Organizational &financial improvements

Appendix 3: Operational improvements

Appendix 2: Cost & uncertainties

Appendix 1: Introduction

Context & main conciusions

5

—

Strategy& PwC

—

—

Confidential property

Prepared for Ministry of Economic Affairs

• Over time, RWMP provision cost projectionS increased by a factor 9 (+€176Mn to €198Mn vs. €22Mn in 2000)
and €82Mn has been spent at the end of 2016, ECN rnaintained a provision of €11 6Mn for the total RWMP
• Since 2000, the government contributed €58Mn to RWMP costs plus a €4OMn ban in 2016 for general purposes
ECNINRG contributed €93Mn (no information available on costs and funding prior to 2000)

—

—

—

6

• To manage the waste transfer from Petten to Zeeland, ECN/NRC set-up a radioactive waste management program
(RWMP) which is operated by license holder NRC and funded by ECN which carries the liability on its balance sheet
• RWMP costs related to stored and decornrnissioniflg waste are inherently uncertain and difficult to predict due to:
Many different waste streams (85) each with specific characteristiCS, processing and disposal requirementS
Contents of various waste streams and canisters is not yet exactly known and also complex to determine
Disposal process requires specific expertise, unique solutions, tailor made equipment and special tools

—

—

—

• NRC’s radioactive waste is categorized into three main categories:
Operational waste: waste from current or recent activities of which the compositiofl is precisely known and
disposal route is defined and agreed with COVRA (to be transferred to COVRA within 2 to 5 years after production)
Stored historical waste: waste from historical activities of which the corn position and/or disposal route is uncertain
or not yet agreed with COVRA (to be transferred to COVRA as soon as possible)
Decommissioning waste: waste that will largely be produced in the next 15 years from bringing —10 facilities to
sufficiently 10w radioactivity level or greenfield state after operational life time (LFR decommissioning is in progress)

• Since the commissioning of High & Low Flux Reactors (HER, LFR) in the 1960s, radioactive waste from nuclear
activities was stored at waste storage facility (WSF) at Onderzoeks Locatie Petten (OLP) in the interim before
final disposal (which does not yet exist)
• In 1984, the Dutch government decided that all radioactive waste is to be collected and stored for the interim period
until final disposal by a single organization (COVRA) following the relocation of COVRA in the 1 990s, it was decided
that all radioactive waste from Petten (new and stored) needs to be transferred to Zeeland

Brief introduction of the case

ECN/NRGfaCe increasing and uncertain costprojections
from the obligation to relocate radioactive waste to Zeeland

—

ECN

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

Note: ECN/NRG arguments are not well documented in any leve! of detail and are not substantiated by facts and analyses (e.g., lega! or financial underpinning is not avai!able),
prevlous recommendation to create a dear bene fits case for liabiity take-over by the State have not been executed
Source: NRG Management

STRATEGY& OBSERVATION INCLUDED IN APPENDIX

—

“The waste treatment process lacks a party responsible for the overall cost control; all parties are fully or partially
owned by Dutch government and their incentives are driven by reducing only their own risk ECN/NRG is at the
top of this chain and is forced to absorb all cost of other parties and/or the cost implications of their decisions”

“ECN/NRG is not responsible for the historical waste nor decommissioning costs, as both have their origins in the
time before the creation of ECN/NRG; thus the Dutch Government carries this responsibility”

“The burden of historical waste poses a key risk to the success of Pallas as it deters investors”

“The obligation to have enough revenues from medical isotopes to support the costs of historical waste puts a
risky pressure on the safety required for nuclear processing. Also when NRG is for too long time under a financial
pressure, this could lead to unsafe situations”

“The burden of historical waste jeopardizes the financial viability of ECN/NRG and thereby threatens
unnecessary the supply of medical isotopes to 25.000 patients per day, as the costs of historical waste will not
disappear when NRG is not viable”

“The business case for isotope and consultancy activities is positive, but this business cannot carry costs for
historical waste disposal nor is it meant to, as there is no link between commercial activities and the cost for
historical and decom waste”

ECNINRG request

ECN/NRG’s requests that the State should take over RW1VIP
costs and liability

7

ECNINRG MANAGEMENT PERSPECTIVE

Strategy& PwC

—

—

Confïdential property

Prepared for Ministry of Economic Affairs

8

• In September 2016, the Ministry of EconomicAffairs supported ECN’s conciusion that costs related to historical
radioactive waste disposal are inherently uncertain, cannot be avoided and cannot be fully absorbed by
ECN/NRG’s current nuclear activities (nuclear energy and medicine research, consultancy and isotopes production)
• ECNINRG plays a key role in the Dutch and international energy and nuclear research sector, the global supply of
medical isotopes (for which the business case is positive), and contributes to regional employment and to the
potential success of the Pallas project
• A discontinuation scenario is Iess attractive than investing and to ensure long-term continuity of ECN/NRG the
Ministry of Economic Affaris granted further financial support in terms of a ban and reduced interest rate
• In addition, the Ministry of EconomicAffairs decided to pursue further structural solutions and investigate:
Carve-outs of ECN’s Duurzaam activities and merger with TNO to create unified Energy Research Center and
independent pobicy advice activities (“Rekenmeester Functie”) to Planbureau voor de Leefomgeving (PBL)
Options for effective and cost-efficient disposal of NRG’s historical radioactive waste and considerations
for the potential take-over of related activities, costs and liabilities by other parties (scope of this report)

Brief introduction of the case

Since 2000, EZ contributed on an ad-hoc basis to ECN/NRG
continuity and is now studying more structural solutions

Strategy& PwC

Evaluate cost-effective
optimization options
and considerations for
potential take-over of
costs and liabilities
related to ECN/NRG
historical radioactive
waste

Main objective

0

Confidential property

Prepared for Ministry of Economic Affairs

Evaluate (substantiated) benefits and drawbacks of
potentially separating NRG’s historical radioactive waste
activities, costs and financial liabilities

Evaluate potential scenarios for separating NRGs
historical radioactive was te activities

and disposal of the historical radioactive waste

0.
Identify opportunities for more cost-effective processing

Provide insight into historical radioactive waste disposal costs
and potential bandwidth inciuding underlying uncertainties
and drivers and clarity on historical waste definition

Sub-objectives

9

In this context, EZ requested insight into costs & bandwidths,
cost-efficient solutions and potential separation scenario’s

Strategy& PwC

sioning
waste

Decommis

0

Costs
insights and
bandwidth

0

—

—

—

—

NRG cost projections appear to be fairly robust, yet remain difficult to predict as:
Several waste streams are highly complex and require unique solutions, equipment and tools
Disposal plans are stili immature for stored waste, as well as for decommissioning waste
Key NRG resources are also deployed for other activities, which limits execution speed and success
Collaboration with stakeholders (COVRA, ANVS) is not optimal, driving re-work/over-specification
Full scope of risks and uncertainties is not covered (e.g. changes in regulation and acceptance levels)
and therefore not accurately reflected in current reported RWMP costs

—

Recently, NRG completed an in-depth review of its RWMP cost estimates inciuding an initial
assessment of potential cost bandwidths, based on identified drivers and uncertainties

NRG decommissioning plans are still fairly early stage and cost projections remain uncertain due to
complexity of selected facilities, lack of (international) comparisons and long time horizon, and NRG
applies an uncertainty bandwidth for decommissioning costs of between 30% and 100%

Prepared for Ministry of Economic Affairs

—

• A more differentiated approach per facility, taking into account maturity stage and complexity level
confirms that decommissioning costs could exceed €71 Mn (+92% vs. €37Mn) decommissioning the HCL
could have a higher exposure than currently anticipated whilst other facilities are within or below NRG range

•

—

NRG stored waste disposal plans and cost projections are most advanced for RAP families, but
further detailing is required across all waste streams The current high case estimation for cost
related to stored waste disposal is €ll3Mn (+68% vs €67Mn), but this is not an absolute maximum cap

—

• Whilst actual total costs will ultimately only be known after disposal is fully completed, we believe that
applying NRG bandwidths for stored waste provides a fair indication of potential ranges given the
maturity level and information available today and limitations for relying on the potential use of these ranges

1

—

10

• Atthe end of 2016, ECN maintained a€ll6Mn provision for RWMP, of which €67Mn for historical stored
waste, €37Mn for decommissioning waste and €l3Mn for operational waste these reported costs do
not inciude any contingency for unknown uncertainties and do not fully reflect inherent uncertainties

ECN/NRG recently completed an RW1VIP cost review, which
confirms the limited maturity level and high cost uncertainty

r-

—

Strategy& 1 PwC

Cost
efficiency
improvement
options

• We believe there are three improvement areas for further improving the robustness of NRG’s RWMP
cost estimates, program management and reporting:
Develop holistic approach in identifying cost optimization opportunities across the waste value chain
rd parties early on to develop plans and validate assumptions
involving COVRA, ANVS knowledge & other 3
Enhance program management capabilities and drive plans through a structured stage-gate-process
and maturity funnel with clearly defined criteria and KPls for completing each maturity phase
Report costs regularly with probability levels for achieving cost projections and differentiate between
stored (short-term priority) and decommissioning waste (longer-term horizon) and review provision level

Cost insight
& reporting
improvement
options

—

•

Focus and first priority is for stored waste streams

—

—

Prepared for Ministry of Economic Affairs

decommissioning waste has a longer time horizon

• Going forward, NRG and COVRA should jointly identify and evaluate optimal disposal route for each
waste stream as a result of this project, several concrete opportunities were identified

—

—

—

—

11

• Within these boundaries there are opportunities for cost-optimization by making four key economic
trade-offs across the value chain:
What activities are done or how: make trade-offs between technological solutions with different costs
When activities are done: optimize workload over time, leveraging potential technological advancements
Where activities are done: concentrating investments in one location, leveraging volume consolidation
Who the activities do: leveraging different suppliers for make-or-buy decisions

—

—

—

• There are two boundary conditions that need to be considered when identifying cost-improvements:
All waste needs to be characterized before it can be transported requiring specialized work at OLP
Furthermore, all waste needs to be characterized for intermediate storage and final disposal
As a result, all waste streams needs to be transferred to COVRA and cannot remain unsorted at OLP

—

—

—

• Currently, NRG has a strong technical focus on managing costs related to the RWMP program, and
adequately leverages internal and external expertise, multi-functional teams and international peers to
develop and evaluate effective and cost-efficient solutions

0

There are dear opportunities to enhance program mgmt.
and to realize cost efficient solutions across the value chain

Strategy& PwC

Financial
liability
solutions

Alternative
organis
ational
options

Confidenlial property

Prepared for Ministry of Economic Affairs

State take-over of RWMP liability as requested by ECNINRG remains not yet substantiated; Critical
opportunities for improvement of the current situation need to be investigated first

—

—

—

—

•

—

—

More structural credit solutions are possible in the current set-up without it being a blank check and
a risk of providing state-aid, and ECNINRG incurring high-costs andlor risk premiums
There are instruments for more structural support, such as credit guarantees or state fund
There seems to be legal basis to further support stored waste removal without non-compatible state aid
penalties, but exact terms and amounts are stili under investigation by government
Terms of State support could be used as a vehicle to driver cost and operational excellence
Take-over of the liability introduces additionaF risks, costs and change which ECN/NRG cannot absorb

—

—

—

—

—

—

—

•

•

12

Realizing economic benefits across the waste disposal value chain requires better collaboration
between NRG and stakeholders for which we have identified three organizational alternatives:
Short term option, of the current situation with carve-out a dedicated waste team from NRG, improved
cross value-chain operational collaboration and expert input from ANVS & COVRA and others to develop
and evaluate more cost efficiency solutions within set (safety) regulation
Second option, with a further holistic value-chain approach, COVRA taking over and integrates all
operational activities, and a steering committee approving the program budget, planning & investments
(safeguarding the financer’s interests) can be considered in mid-term in case tangible benefits are proved
Third option, optimization on national level under decommissioning authority, requires policy, ownership,
financial and governance changes and can only be justified in case of scale benefits and synergies from
joint disposal optimization e.g., large decommissioning programs from different sources and companies
• Current situation of repeated credit crises, lack of transparency and grip on costs is not sustainable
ECN/NRG’s current profit generating activities cannot fully absorb RWMP costs and uncertainties
Current situation of repeated credit crisis situations causes a distraction for all stakeholders involve and
does not contribute to safe, quick and cost-efficient disposal
Government de-facto already provides financial back-stops to absorb cost increases and has few
instruments to increase grip on costs and influence RWMP execution
Situation is likely to continue as RWMP provision does not include contingencies despite high uncertainty

Waste organization, collaboration andfinancial support
should be improvedfirst before considering liability take-over

—

Strategy& 1 PwC

0

O

Confidential property

Prepared for Ministry of Economic Affairs

Finalize identification of cost-optimization opportunities across the value chain (NRG,
COVRA and ANVS), quantify high-level synergy potential, align different incentives
amongst the three stakeholders and identify required enablers
Investigate short-term options for more structural (government) credit support within
current organizational and governance set-up and develop charter with terms and
incentives and KPIs aligned to government objectives (safe, quick, and cost effective
disposal safeguarding the “polluter pays” principle and contributions from ECN/NRG)
Further investigate legal, organization and financial considerations for longer-term
optimization opportunities (Le., alternative models 2 and 3) only once organization
model 1 is fully implemented and has reached a steady state

program progress against agreed timeline and probability linked cost estimates

Improve NRG’s RWMP program management capabilities and implement a structured
0 stage
gate process with dear milestones and KPls, and regular communication of

management organization (separate from NRG’s nuclear
• Strengthen dedicated waste
activities) with clearly defined and agreed operational KPIs to drive operational focus
and develop transition roadmap for greater cross-value chain collaboration (model 1)

Key next steps

We see a number ofkeyfirst steps that should be taken in
order to start improving the current situation

13

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 3: Operational improvements
Appendix 4: Organizational &financial improvements

Appendix 2: Cost & uncertainties

Appendix i: Introduction

Context & main conciusions

14

1965

1976

1998

2001

> founded in ‘82 and in ‘84
3
COVRA
selected as central waste storage in
Petten decides for relocation to Zeeland

First waste
stored in WSF
in Petten

COVRA opens HABOG
for storage of high level
radioactive waste

NRG takes over JRC nuclear
permit and liabilities related to
>
3
all hist. operations of HER

Government awards NRG
permit with COVRA as explicit
destination for nuclear waste

ECN & KEMA
nuclear act.
JV: NRG

2005

2006

2017
ECN acquires KEMA
stake of 30% in NRG;
becoming full owner NRG

:zz:zzzdrzEErzdzz:jzzz:zJzzL::zz zzzz

2003

Strategy&

1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

1) Reactor Centrum Nederland Stichting, 2) Energieonderzoek Centrum Nedertand Stichting, 3) Centrale Organisatie Voor Radioactief Afval NV
Sources: Strategy& analysis, COVRA, wwwnro.eu, www.ecn.ni, Update kostenraming RWMP 2016’, ‘Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG (2007)’, ‘Kostenraming
Decommissioning Nucleaire faciliteiten ECN-terrain & afvoer radioactief afval (1998)’, Onderbouwing update DECOM kostenraming voorz uit 2016.xlsx, ‘update voorziening RWMP uit 2016.xlsx’,

)
2
RCN becomes ECN
due to inclusion of
non-nuclear activities

Establishment of
> by a.o. EZ
1
RCN

zzrrrz:E:c:zrzzzz

1996

ECN starts
production of
medical isotopes

1986

Lz
z
1
zzEE\
z:z:zz

1955

ECN/NRG timeline with key milestones

NRG wasformed out of the ECN and KEMA nuclearjoint
venture, but activities started in 1955 as RCN

15

Nuclear Operations
(NO)

1 Irradiation & Solutions
(I&S)
1

1

Radioactive Waste Management Program
(RWMP)

Consulting & Services
(C&S)

Strategy& 1 PwC

Sources: Strategy& analysis, NRG

4

1

—

_Research & Innovation
(R&l)

NRG
(100% ECN subsidiary)

NRG’s activities

1

Prepared for Ministry of Economic Affairs

Radioactive Waste Mgmt. Program (RWMP)
• RWMP is the program of processing and
transporting all rad ioactive waste and the
main focus of this study
• The challenge for this program is the high
uncertainty about future costs with respect
to historical stored and decommissioning waste

16

NRG
• NRG is the operator of the High Flux Reactor
(HFR) in Petten and provider of nuclear
research and consultancy services
Main source of revenue is irradiation,
•
production and sale of medical and industrial
isotopes
• Isotopes have a history of pricing below full
cost levels, making it challenging to run
business sustainably

Comments

NRG is a nuclear services provider and producer ofmedical
isotopes based in Petten, and is afuil subsidiary ofECN

• (Current) waste from operation of the OLP plants, primarily from research
activities and Mo-99 production
• Normally moved off the site within between two and five years (from OLP to
COVRA) as a matter of routine through an open waste disposal flow
• Incurred waste treatment costs inciuded in integral product cost calculation

Operational
waste

Source: NRG

Strategy& PwC

Prepared for Ministry of Economic Affairs

• Radioactive waste resulting from decommissioning and clean-up of all
structures (LFR, HER, HCL, etc.)
• Part of this waste to be created only at facility end-life (until —2030)

Decom
missioning
waste

Confidential property

• Mainly canisters with historical radioactive waste produced by experiments, of
which the exact composition is largely unknown
• Also inciudes waste resulting from operating and maintaining the HER that
cannot be directly moved off the site

Stored
historical
waste

(out of scope)

Processing and transport of all radioactive waste to COVRA

RWMP

RWVIP consists ofstored historical and decommissioning
waste, plus operational waste

17

1

0

0)

(1)

.

(heatproducing)

High level

(non-heat producing)

High level

Medium level

Low level

Very low level

Activity level

L

1
1

1
1

1

Strategy& 1 PwC

Confidential property

LOG’

-

Prepared for Ministry of Economic Affairs

“Hot” section

2
HABOG

“Cold” section

1 COVRA

18

(central storage exempt)

Landfill

Interim storage type

Current nuclear waste storage policy

1) Laag- en middelradioactief afval Opslag Gebouw 2) Hoogradioactief Afval Behandelings- en Opslag Gebouw; Sources: Strafegy& analysis, COVRA

• Since 1 960s, radioactive waste from nuclear
activities was stored at waste storage facility
(WSF) at Onderzoeks Locatie Petten (OLP) in
the interim before final disposal
• In 1984, the Dutch government decided that all
radioactive waste is to be coNected and stored
for the interim period until final disposal by a
single organization (COVRA)
• Following the relocation of COVRA in the
1 990s, it was decided that all radioactive waste
from Petten (new and stored) needs to be
transferred to Zeeland

T

Current ECNINRG storage

Nuclear waste storage

Radioactive waste was intended to stay in Petten until disposal
but changes in regulation requires relocation to Zeeland

Charged with
collecting and
disposing all nuclear
waste in NL

Strategy& 1 PwC

ANVS is the policy
advisor, licensing
authority and
inspectorate for all
nuclear activity in NL

Key auditing organization

Service provider that
conditions nuclear
BELG
PROCESS waste (e.g. RAP
from NRG)

ccYv’RA.

...

NkG

Operator of the HER
and responsible for
all waste at Petten

Involved organizations

1?.•.
.%
19

COIRA

.%

COiA

BELG
PROCESS

NkG

Prepared for Ministry of Economic Affairs

• After 100 years, waste is permanently moved to an
underground geological disposal (end-storage)

• Waste is stored in secure facilities for 100 years

• Waste is compressed to minimize physical footprint
• Waste is encapsulated in concrete

• Waste is transferred to transportable containers

Confidential property

Dispose

Store

Condition

Repackage
(for transport)

Characterize

• All nuclides and radiation types residing in the
waste are mapped to create required
documentation for transport, storage and disposal

NG

• Waste undergoes necessary processes, ranging
from cutting up into smaller parts and sorting waste
according to level of radiation

Process
(e.g. cut,

sort)

NG

Location

• Waste is retrieved, either by lifting waste from
storage facilities or by decommissioning buildings

Description

Lift!
decommission

Process steps

General process chain of RWMP

This transfer ofradioactive waste is done in 7 key steps
involvingfour organizations

-

• Relatively small amounts of waste produced by historical experiments
• Require customized but relatively straightforward disposal routes

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

1) Sodium-bearing waste, Cesium-bearing waste, radiation sources, Tritium filters, Plutonium jars and sanitizing of “Pluggennest”; Source: Strategy& analysis, NRG discussions,
Update RWMP kostenraming (2017)

Several other
>
1
waste streams

11

• Highly radioactive and poisonous waste, generated when replacing certain components of the HFR
• Disposal route highly uncertain, also due to COVRA not having a process for storing beryllium

Beryllium

=

• Several restricted non-radioactive materials used for experiments to be relocated to COVRA
• Materials do not emit radiation and therefore do not need sophisticated treatment before transport

-

Unirradiated
fission material

-

• —30 highly radioactive irradiated fuel rods from the HER
• Rods are currently stored in the basin of the Hot CelI Laboratories, potential disposal route is identified

,

irradiated fuel
rods

,

• 101 canisters of highly radioactive heat-producing waste from experiments with fission materials
• Disposal route is currently stili highly uncertain due to complexity of handling this specific waste

-

Components of radiation tubes removed from the HER when replacing the reactor vessel in 1984
• Disposing of these parts is a process similarto decommissioning of the OLP plants

•

•

338 large canisters with radioactive resin: operational waste from replacing the reactor’s cooling water
• Process for analyzing activity levels in development; will be disposed via service provider in future

527 canisters with alpha-emitting waste from historical experiments
• Will be initiated upon completion of RAP; a customized alpha-proof hot ceil needs to be developed

•

•

Irradiated fission
material waste

II

I1

=
Ij..

—80%

of exp.
costs

Desoription

1120 canisters non-alpha-emitting waste from historical experiments
• Characterization, sorting and repackaging of waste has started and first canisters have been relocated

Overview of Stored Waste streams

—

20

Djfferent types ofrcidioactive waste have historically been
stored in Petten each requiring a customized disposal route

2015

2016

2017

1
Ei

2018

n.a.

Not yet started

Resin

Strategy& PwC

Confidential property

1) Planned number of processed at barrels at start of each year
Source: Strategy& analysis, RWMP Voorziening, management interviews

2022

n.a.

Not yet started

RAP-alpha

Unknown

2019

33%

In progress

1

Planned
completion

RAP

1

1

•

>
1
El Planned

Status

Progress
(in % of total)

2019

152

Waste stream

1

1

1

390

Processed stored waste progress

2014

24

350

Stored waste disposal progress
Processed RAP canisters, in # of canisters

Prepared for Ministry of Economic Affairs

• For all other waste streams no formal
disposal planning has been made

• RAP-alpha is the next waste stream for
which the disposal is planned to start in
2019 and is planned to be completed at
latest in 2022

• Only the low-level contents of 18 original
RAP canisters have been relocated to
COVRA, as other low-level waste has been
rejected due to new developments in
characterization requirements

• Currently, only low-level waste can be
relocated to COVRA as higher-level waste
requires the usage of the notyet completed
Waste Transfer Unit

• At the end of 2016, 33% of the RAP
canisters had been sorted

• RAP is the first waste stream for which the
disposal has started and is planned to be
completed in 2019

Comments

Whilst disposal ofRAP canisters is in progress disposal of
other waste streams has not yet started

21

Underground channel system

Waste Storage Facility (WSF)

• Decontamination & Waste Treatment (DWT)
Sea drainage pipe

Chemical/material science building no. 5 & 6

Jaap Goedkoop Lab (JGL)

Hot Celi Laboratories (HOL)

Molybdeen ProducUon Facility (MPF)

High Flux Reactor (HER)

Low Flux Reactor (LFR)

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

Sources: Strategy& analysis, ww.nrg.eu, Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG (2007)’, Kostenraming Decommissioning Nucleaire faciliteiten ECN-terrein & afvoer
radioactief afval (1998)’, ‘Update RWMP Kostenraming (2017), ‘Onderbouwing update DECOM kostenraming voorz uit 2016,xlsx,, ‘update voorziening RWMP uit 201 6.xlsx’

II. Restoration of landscape to original ‘greenfield’ state
Regulations and internal planning determine adherent requirements,
which form a basis of cost calculation

And possibly to:

22

1. Regulatory restoration to sufficiently low levels of radioactivity

Need to be decommissioned to:

Reactor 1
production

•
o
o
o
o
Treatment 1
o
o
Storage
e

Facilities on ECNINRG site in scope of investigation:

Decommissioning at OLP invoives bringing iofacilities to
sufficientiy low leveis ofradioactivity or greenfield state

Research

1964

1960

1996

196x

196x

2007

1 96x

Various

HCL

DWT

MPF

Sea
drainage

Channel system

JGL

Building
no. 5 & 6

Other buildings

Numerous
purposes

Research

Waste drainage

Waste
storage
Sorting &
research
Waste
treatment
Isotope
production

•

•

•

•

•

•

Low Flux Reactor; for training personnel and facilitating nuclear experiments.
Decommissioning currently in process
Waste Storage Facility; long-term storage facility where historical radioactive
waste is stored
Hot Celi Laboratories; for sorting RW & experiments with HER
3 output for
research / production
Decontamination and Waste Treatment; to separate, sanitize and transport
radioactive waste
Molybdeen Production Facility; preparing radiated Molybdeen (isotopes) for
transport
4.4 km long channel to transport conditioned radioactive water from DWT to
sea
Underground channel system for transport of substances (possibly RA)
between facilities
Jaap Goedkoop Lab; for researching new isotopes and improving radioactive
waste management
Buildings for radiological research; no. 5 for spectometrics and no. 6 for
material sciences
Inciudes buildings no. 15, 28 & 39 and other unspecified facilities with limited
impact on costs

Description

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

23

Sources: Strategy& analysis, www.nrg.eu, Update
raming’ (2017), Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRC (2007)’, ‘Kostenraming Decommissioning Nucleaire faciliteiten
ECN-terrein & afvoer radioactief afval (1998)’, ‘Update RWMP Kostenraming (2017), Onderbouwing update DECOM kostenraming voorz uit 201 6.xlsx,’, ‘update voorziening RWMP uit 2016.xlsx’.

Total

On-site
transport

1962

WSF

Reactor

1960

LFR

Purpose

Start of use

Facility

Overview of facilities with share in the provision as of end-of-year 2016

Facilities were built over various periods of time and used
for training, storage, research and production purposes

1

)

—

Year

Decommission

No_plan_specmed

Cooling off

-,

Most attention now to
bring stored waste as
soon as possible to
COVRA

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

24

Some facilities are still
planned to be in use
beyond 2030 as they
will be used during the
decommissioning
activities (e.g., DWT)

StilI, planning can be
made on how and when
to bring planning per
building to next maturity
phase

—

—

Decommissioning
planning currently has
less priority than the
disposal of stored waste

Comments

1) Preliminary plans await finalization of plans for HFR succession; 2) Building no. 24 is part of the DIA/T and has the same planning except for sanitation work in 2014
Source: Strategy& analysis, NRG “herziene geactualiseerde PvA RWMP augustus 2015”

)
1
Other buildings

Building no. 5 & 61)

JGL

1

In use

Channel system

Sea drainage

MPF

2
DWT

HCL

WSF

1
HFR

LFR

Facility

Activity:

Decommissioning plan

Decommission work has a longer time horizon than stored
waste, as most buildings will be in use until ‘2027/2030

Historical stored
waste

Decommissioning
waste

1

1

Strategy& 1 PwC

Source: Strategy&

Operational waste

—

x

Part of RWMP
provision for
historical waste

Funding of waste categories

1

Confidential property

Partially a direct link to
current activities, but
involved in historical
activities as well

No direct link to current
activities

Direct link to current
activities

•

Prepared for Ministry of Economic Affairs

These funds have regularly
been insufficient, requiring
NRG to ask government for
additional loans

• Funded out of RWMP
provision, which is yearly
adjusted to the newest cost
estimates. Resulting deficits
are then funded by ECN/NRG
as much as possible out
current operations

• Funded directly out of current
business operations

operational vs. historical waste

Historical waste costs are a part of the RW1VIP not directly
linked to current incomefrom research & isotopes activities

25

22

Additions
operational
)
3
waste

21

Correction
for infiation

31

Change in
accounting
)
1
system

Total spend
2000-2016

Provision
end-2016

116

Stored + decom

Operational

End-201 6 provision level yet
to be approved by NRG
RWMP steerco; additions
have not yet been allocated

Funds for operational
waste are annually
added and taken from
an operational waste
buffer

16

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

1) Inciuding operational provisions in tariff instead of retrospective allocation, and change to constant value calculations 2) No insights avallable from NRG for costs made before
2000, or how €22 Mn provision end 2000 was funded 3) Includes total of €20Mn (of which €4,5 Mn for operational waste) proposed addition in 2016, to be approved by NRG
Steerco; Source: Strategy& analysis, “Oveaicht ontwikkeling voorziening RWMP vanaf 2000

Identified
additional
costs 3)

Mainly driven by maturing
treatment insights, increased
storage cost and requirements

9x€22Mn

Provision
)
2
end-2000

€198Mn

Development of RWMP provision 2000-2016, in €Mn

Over time, RWMP costprojections increased by afactor 9
(Cl9SMn Vs. C22Mn in 2000) and €82Mn has been spent

26

2016

1

ECN/NRG Funding

7%.

58

+402)

State Funding

Addition JRC
)
3

Transfer 2000 1 9
Escrow 2004 ‘1 14
2)
Escrow 2006
Escrow 2012
35
‘2)
Escrow 2016
Government funds EZEJ 58

:

2016 Proposal

1

20

2016 Addition to be confirmed by
NRG Steerco of which at least
€6Mn is expected to come out of
2016 €40Mn escrow

198

2)

Total to date

:
:

,

Strategy& PwC

—

Confidential property

Prepared for Ministry of Economic Affairs

1) No insights available from NRG of how €22Mn provision end 2000 was funded;
2) 2016 Escrow of €4OMn was not formally added to RWMPprovision at least €6Mn is expected to be used to cover 2016 additions; 2006 Escrow was not added to RWMP
pro vision but used for Pension funding support (con firmed by both EZ and ECN/NRG finance departments)
3) Compensation for transfer of waste responsibility from Joint Research Center in 2005
Source: “Overzicht ontwikkeling voorziening RWMP vanaf 2000, NRG, Ministry of Economic Affairs, Strategy& analysis

)
1
2000 Start

22

60%

93

In 2016, a €4OMn ban was
provided to ECN/NRG to
cover liquidity gap which can
be used to cover RWMP costs

to RW1VIP

for generalpurposes

Financing of RWMP provision additions 2000-2016, in €Mn

ban in

the government contributed C58Mn

a C4OMn

2000,

costs plus

Since

27

—

—

• In addition, the Ministry decided to
investigate further structural solutions:
Carve-outs of ECN Duurzaam activities
and “Rekenmeester Functie”
Options for more cost-efficient historical
waste disposal and considerations for
potential separation and/or take-over of
related activities, costs and liabilities

• To ensure long-term continuity of
ECNINRG’s nuclear research and isotope
supply the Ministry of Economic Affairs
decided to grant further financial support
(extra ban and interest rate reduction)

Government response

Strategy& 1 PwC

Prepared for Ministry of Economic Affairs

Source: ECN Business Case August 2014, Current MJV, MJV Presentation to EZ, Letter to Dutch Parliament by Minister of Economic affairs of 30-9-2016; Strategy& analysis
28

In this context, EZ requested a study to gain insight into the definition, costs and potential
bandwidths of the historical waste, cost-efficient solutions and potential separation scenario ¶s

•

• As a consequence, ECN concluded it
cannot cover the costs of historical waste
disposal and requested EZ to take over the
related liability and costs as part of a broader
support package

—

• Recently, ECN revised its business case
substantially downwards and now projects
€83Mn negative liquidity by 2026 €1 52Mn
below its previous (2024) projection

• In 2014, the ECN/NRG business case
identified key risks, but investment was
attractive compared to discontinuation
scenario (€l2OMn termination cost)

ECN request (2016)

Summary of ECN requests and EZ response

EZ has received requestsfrom ECN and the Dutch parliament
regarding ECN’s historical radioactive waste

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 3: Opercitional improvements
Appendix 4: Organizational &financial improvements

Appendix 2: Cost & uncertciinties

Appendix 1: Introduction

Context & mum conciusions

29

31-1-2017

k202 10128 41220

12 12

emva

JA%dnm,g

001m8

medoehm.

S812.

_

Strategy& PwC

Source: Strategy&, Update Kostenramping RWMP

êimnn,

rv,Il

j

31.m-201’

ea(,

A

L

In opdracht van Programma Manager RWMP

VrtrouwnPijk

Elndrapporta9e

Update RWMP
Kostenraming

JA

Prepared for Ministry of EconomicAffairs

• There is general industry consensus that the final costs for
nuclear (decommissioning) waste treatment cannot be fully
certain until disposal operations are fully completed
30

• Based on our review and interviews we believe that ECN/NRG’s
most recent projections provide a fair indication of potential
costs, uncertainties and bandwidths based on information and
expertise that is currently available and time that has been
invested on a best-effort basis

• ECN/NRG claims that these estimates do not reflect the
associated risks, that these risks be quantified and that
therefore these numbers cannot be relied upon

• ECN/NRC disposal plans are to some extent stili not mature
and waste streams complex and difficult to assess and therefore
these estimates cannot be considered as final and could
ultimately exceed current projected bandwidths

• NRGs RWMP cost estimate update is the result of the work
covering a —4 month period which inciuded multifunctional
technical brainstorm sessions to detail costs and uncertainties

• Our assessment of cost and uncertainty estimates are based on
the RWMP cost update review, finished in January 2017 by
NRC, suppiemented by key staff interviews and underlying data
analysis

Confidential property

NRGs RWMP cost estimation update 2017

Our cost and uncertainty assessment is based 0fl a --4 month
internal NRG technical review

NRG
high case

Potential
maximum

—

accompanied
probabilitieS
seep.47
4
8
&
for detail

j

NRG
Fu
1t
would be Yi ca

NRG

high case

NRG

middie case

ecommiSSiOfling waste

Strategy&

7

1

maximum

Potential

r

ee that costs remain within bandwidth, or not exceed high case, as waste streams are complex

NRG
NRG
low casej middie case

113

7

2

1) Estimations preliminary, to be approved by NRG RWMP steerco; uncertainty as defined in J. Boogaards Eindrapportage “Update RWMP Kostenraming”
Source: Strategy& analysis, Eindrapportage Update

edri

RAP-Alfa

RAP

Historical Stored waste

Other Stor

1

ranges €Mn
,
Projected radioactive waste cost 1

exceed currentproViSiofl levels ifuncertainties materialize

€

• Process speed uncertainty increased by critical staff that has to
balance commercial and waste activities
• Learning effect uncertainty; effect and impact hard to estimate:
Stream variances
Critical staff changes and difficult staff hiring/training
• Duplication of work between COVRA & NRG

Technical
corn plexity

Operational
efficiency

• Uncertainty on shifts in regulations, could impact feasibility and
costs of RWMP when processes need to be adapted

• COVRA price uncertainty; periodicaNy revised to cover final storage
• Other 3rd party price uncertainty; e.g., BelgoProcess, cannot be
directly controlled

Acceptance

Legislation/
regulation

Price
increases

Strategy& 1 PwC

Confidential property

Source: Strategy& analysis, NRG inter,iews, Eindrapportage “Update RWMP Kostenraming”

criteria

• COVRA’s acceptance criteria uncertainty: unclearly defined or
unknown for all streams, driving uncertainty about requirements and
risk of rejected waste (e.g. RAP Family II)
• Double education at the handover COVRA-NRG needed, due to
standalone NRG operations; Lack of quality control & assurance by
COVRA of NRG operations

—

—

—

—

• High uncertainty in hours, investments, 3rd party costs and
amount of rework needed drive by required (sometimes stili
unknown) new solutions
Lack of reference cases on unique treatment routes
Uncertainty on actual composition of historical waste

Key overarching uncertainties

0—

Cost
impact

9

32

Future
uncert.

J 1

Hist.
impact

Prepared for Ministry of Economic Affairs

X

Partof
current
estimate

There is a risk that costs could exceed even the high cases, as
NRGperspective does not accountfor all key uncertainties

1

reasonable CAPEX estimates

• Based 0fl nuclear decom standard levels of plan
maturity and LFR experiences
• Costs indexed based on factual cost increases seen
for LFR

•

•

Strategy& 1 PwC

Confidential property

Source: Strategy& analysis, Eindrapportage “Update RWMP Kostenraming”

Large parts

Q Low

High

Prepared for Ministry of Economic Affairs

• No budget for unforeseen costs, all
inciuded in uncertainty bafldwidth
• Only preliminary decom studies, no
detailed engineering fact base
33

• Service fees of external service
providers vâry greatly dependirig on the
result of sampling and characterization

• Cost estimate for sampling and characterization is based
on quotes by external laboratories
• Cost estimate for ificineratiofi is based on quotes and
studies of similar disposal cases

detailed numerical substantiation

• CAPEX for alpha celi is rough estimate
as specifications are still unkflown
• Storage prices are not fixed with COVRA
• Adjustments to building 24 not inciuded

• Based on similar known facts as RAP
• Alpha ceil costs based on quotes and expert opinions,
using conservative assumptions on specs

• No
(D Very rough estimate based on outdated provision
provided for costs
Comparable to RAP-alpha: preliminary route estimates
Other waste J are based on current personnel costs, storage costs and • Routes are untested and unproven, so
uncertainty remains high
streams

Resin

J

• No budget for unforeseen costs, all
inciuded in uncertainty bafldwidth
• Estimates not aligned with COVRA to test
corn pletefless of process costs

Key weaknesses

• Based on known facts (such as process speed,
personnel cost, storage costs) or reasonably estimated
figures (e.g. level-mix of waste)
• Estimates revised based on first experiences

Robustness of current NRG estimates

Assessment of latest NRG cost estimate robustness

NRG’s costprojections are most advancedfor RAP and
further detailing is requiredfor most other waste streams

1.3
1.4

Several other
streams
67.0

—

—

—

Other:
• Costs for service providers, e.g.:
BelgoProcess for conditioning medium/high
level rad ioactive waste
3rd party for incinerating resins

—

—

COVRA costs:
COVRAfees for
Conditioning low level waste
Storing and disposing of all radioactive waste

Personnel:
• Researching and developing disposal routes
• Operating storage facility, hot celis and WTU

CAPEX:
• WTU to be built to repackage medium/high level
waste for transport (€8.3Mn)
•
Containers for transport to BP/COVRA (€4Mn)
• Alpha ceIl to be built to sort RAP-alpha, including
required adjustments to building 24 (€5Mn)

Main cost items

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

1) Estimations preilminary, to be approved by NRG RWMP steerco. Source: Strategy& analysis, NRG interviews, Eindrapportage “Update RWMP Kostenraming”

32%

09

113-4

Beryllium

• Other

— COVRA costs

1.1

19j

1.2

•
•

•I

Large parts
(“grote delen”)
Irrad. fiss.
material
Irradiated fuel
4:
pins
Unirr. fission
material

—

—82% of
total :—
costs

2.6

1

35.6

NRG projected remaining costs’

Resin
(“harsvaten”)

RAP-alpha

RAP

Stored waste
stream

34

Costfor disposal ofremaining stored waste is projected to be
€67Mn ofwhich 82% is attributable to RAP(-alpha)

Stored waste

OPEX

33
(60%)

Strategy& 1 PwC

Confidential property

Source: Strategy& analysis, NRt inteniiews, Eindrapportage “Update RWMP Kostenraming”

CAPEX

22
(40%)

55

Key CAPEX items

Prepared for Ministry of Economic Affairs

€400k

€1.2Mn

• Additional adjustments to characterization
equipment (VINISH)
• WRU to lift corroded canisters from the
WSF

€2.3Mn

• Adjustments to BelgoProcess
installations to accommodate RAP waste

€55Mn
€4.OMn

Alpha ceil to safely sort RAP-alpha and all
required adjustments to building 24

€8.3Mn

• Transport containers

•

• WTU to repackage medium/high level
waste for transport

CAPEX as share of total RAP(-AIfa) costs, in €Mn

35

There are some large investment in the CAPEXp1ans which is
40% oftotalprojectedRAP(-Afa) costs

Stored waste

/

,

/

Condition

/

/

/

II

/

29%

costs:
51%

rd party
3

Store
dispose

4

Conditioni

,,-1

Repackage
(for transport) ,/

Characterize

Process
(e.g. cut, sort)

Lift

Overhead

-S

18%

12%

1 0%

11.9

costs:
36%

rd party
3

Strategy& 1 PwC

Confidential property

Source: Strategy& analysis, management interviews, RAP model kostenraming, RAP-Alfa model kostenraming

Store +
dispose

/

/

o

/ 8%

/ i

Repackage
(for transport)

/

Characteraze

/

Process
/
(e.g. cut, sort) ,“

Lift

Overhead

21.0

RAP-Alfa

Breakdown of OPEX per process step, in €Mn

Prepared for Ministry of Economic Affairs

• These costs are largely
determined externally and
are therefore not in direct
control of NRG

36

• The largest share of OPEX of
both waste streams is
attributable to third parties
such as BelgoProcess and
COVRA

• The OPEX drivers of RAP and
RAP-Alfa are similar, although
the latter has higher remaining
overhead costs due to its lower
maturity

Comments

OPEXconsists of36% and 51% in third party costs (COVRA
and BelgaProcess) and the balancefrom NRG internal costs

Stored waste
4

.‘
Unirr.fiss. mat.

Maturity of disposal plan

= €2Mn

—-

RAP 1-2 LLW

othenilies

• Irr. fuel iflS

Irr. fiss. mat.

RAP Alfa

•

• Large parts

Beryllium

Size of the bubbie represents pro vision size

+20% —
+50%

Disposal route well developed
Acceptance criteria unknown

Other

Berylhum

• Some disposal routes tested
No major unknowns
•

• No agreement between NRG
and COVRA

•

Unirrad.
fission mat.

iflS

Rods cut and transported with
irradiated fiss. mat. waste

Route similar to RAP route
Transport container unknown

Irradiated fuel
•

•

.

•

Strategy& 1 PwC

Confidential property

0 Low level of maturity

Prepared for Ministry of Economic Affairs 37
High level of maturity

—

+10%
+30%

—

+30%
+100%

—

+10%
+30%

+10% —
+30%

+30% —
+100%

Characterization in pilot phase
Tender still to be held

Irrad. fission
mat.

•

•

•

—

+30%
+100%

—

+20%
+50%

Un)
1
certainty

+30% —
+100%

-

Route similar to RAP route
• Alpha celI stili in design phase

• First canisters treated
• Only LLW can be conditioned

Development of disposal
route

Large parts
( No work plan in place
(“grote delen”) “—‘ Radioactivity of parts unknown

-

RAP-alpha

Stored waste
stream

1) As defined in J. Boogaards Eindrapportage “Update RWMP Kostenraming’ Source: Strategy& analysis, NRG interviews, Eindrapportage “Update RWMP Kostenraming”

Low

High

Complexity
of disposal

Corn plexity and maturity of disposal routes of stored waste streams

Waste disposal plan complexity and maturity level drive cost
uncertainties and vary between the stored waste streams

Stored waste

67.0 +23%

+100%

—

+68%

II

II

83

NRG 10w
case

NRG
middle
case

— !

67

11

?

1

Costs could stili
exceed high
case, as not all
(external) risks
are included

38

Ideally, cases
1
wouldbe
accompanied by
probabilities,
1
seep.47&48 1
for detail

NRG high Potential
case
maximum

113

— Other Stored — RAP Alpha — RAP

projections (Low Case) do not include any other
p9!qis for unforeseen çrl buffers

Strategy& PwC
Confidential property
Prepared for Ministry of Economic Affairs
1) Estimations preliminary, to be approved by NRG RWMP steerco
2) As defined in J. 800 gaards Eindrapportage “Update RWMP Kostenraming’ Source: Strategy& analysis, Eindrapportage ‘Update R WMP Kostenraming”

—

—

+30%

+30%

+100%

+100%

+50%

+100%

+50%

+10%—+30%

+30%

Total

11.3

—

+10%

I14

IE

—

+10%

0.9

—

+30%

‘3.4

—

—

+30%

+20%

12.6

—

—

11.2

+30%

+20%

Uncertainty of
2
costs

19.4

NRG projected
remaining costs
)
1

Several other
streams

Beryllium

Large parts
(“grote delen”)
Irrad. fiss.
material
Irradiated fuel
pins
Unirr. fission
material

RAP-Alfa

Stored waste
stream

Stored waste cost uncertainty and NRG projected cost range, in €Mn

waste could exceed currentprojections by 70% or even more

Based on NRG’s estimates disposal costfor remaining stored

Stored waste

1
+10%
+20%

+18%
+20%

Condition

Store + dispose

Weighted average
uncertainty level

NRG uncertainty level
—

—

—

—

—

—

+100%

—

+100%

+30%

+50%

+30%

+50%

+29%

+30%

+30%

+47%

+20%

—

—

—

—

—

+100%

+93%

+100%

+100%

+50%

+30%— +100%

+30%

+50%

+100%

—

÷20%—+50%

+30%

Uncertainty level
)
1
RAP-Alfa

Strategy& 1 PwC

Confidential property

1) Determined during workshop sessions with RAP experts
Source: Strategy& analysis, management interviews, RAP model kostenraming, RAP-Alfa model kostenraming

+20%

rRepackage
(for transport)

+30%

+20%—+50%

Process
(e.g., cut, sort)

Characterize

+10%—+30%

ppl)

Uncertainty level

Lift

Overhead

Process step

Granular view on uncertainties RAP(-AIfa)

Prepared for Ministry of Economic Affairs

Resulting overall uncertainty
levels are consistent with
NRG’s uncertainty estimate

• The resulting weighted average
uncertainty of RAP and RAP-alpha are
similar to NRG’s more high-level
uncertainty level approach

• The mentioned uncertainty bandwidths
are derived from cost estimation
methodologies as a proxy, no specific
method in place at NRG at the moment

• We have estimated and discussed with
NRG the uncertainty at process step
level

Corn rnents

A more granular analysis considering uncertainty level per
process step results supports NRG’s more high-level results

Stored waste

39

37.0

10.9

11.6

11.8

Waste processing and disposal
•
Repackaging of waste
• Transport to and storage at COVRA
•
Final disposal by COVRA

Dismantling
•
Radiological inventory categorization for
decommissioning and decontamination
• Dismantling of reactor
•
Removal of nuclear systems
• Radioactive material characterization

Facility shutdown activities:
•
Removal of fuel and radioactive materials

Pre-decommissioning actions:
Research and development
•
Engineering! contracting
• Permits

Project management

Main cost buckets

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

40

1) European committee is responsible for the decommissioning of the HFR, hence It is excluded in the NRG provision; 2) Decom in progress, provision only reflects remaining costs; 3) MPF is co-operated
by Maliinckrodt; who committed €2.5Mn for decommissioning which is deducted to arrive at NRG provision
Sources: Strategy& analysis, www.nrg.eu, ‘Update
raming’ (2017), ‘Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG (2007) ‘Kostenraming Decommissioning Nucleaire faciliteiten
ECN-terrein & afvoer radioactief afval (1998) ‘Update RWMP Kostenraming (2017), ‘Onderbouwing update DECOM kostenraming voorz uit 2016.xlsx,’, ‘update voorziening RWMP uit 2016xIsx

Other buildings

Building
fl0. 5 & 6

JGL

12.4

‘12.8

Sea
drainage

Channel system

11.3

8.3

)
3
MPF

8.3

6.4

‘

)
2
Decommissioning in progress

NRG proposed provision

DWT

HCL

WSF

LFR

Facility

NRG provision per facility to be decommissioned’)

NRG’s C37Mn provisionfor decommissioning waste is driven
by costs projections related to the WSF, HCL and DWT

0 ecommissioning

+-iOO%

In general large
uncertainty
arou nd
decommission

No comparable
reference case
for estimation

Only rough cost
estimates
available

• Foreign experiences with decommissioning
generally shows significant budget overruns
• Regulations & acceptance requirements could
change significantly over decorn period (until
—2030)

Strategy& 1 PwC

Corifidentiai property

Prepared for Ministry of Economic Affairs

41

Most recent cost estirnation of all individual facilities
dates back to 1998 and is very high level
Current estimates of facilities mostly extrapolate on
these estimations

• Hardly no corn parable projects worldwide
• Criteria for decommissioning differ significantly
among countries

•

•

Explanation

Sources: Strategy& analysis, w.nrg.eu, Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG (2007)’, ‘Kostenraming Decommissioning Nucleaire faciliteiten ECN-terrein & afvoer
radioactief afval (1998)’, ‘Update RWMP Kostenraming (2017), ‘Onderbouwing update DECOM kostenraming voorz uit 2016.xisx,’, update voorziening RWMP uit 2016.xisx’

Provision for decommissioning

€37Mn

LatestNRG review
suggests actual
decommissioning
costs to exceed
pro vision by —30%
to 100%

Key uncertainties

Uncertainty bandwidth of NRG’s cost estimation and underlying key uncertainties

ECN/NRG applies a uniform cost bandwidth of +30 to +ioo%
for all buildings regardless ofdecommissioning complexity

0 Decommissioning

-

+30%
—

+100%

-110%1l5tYoI

Uncertainty of
2
costs

36.9 +26%—+92%

12.4

‘11.8

12.4

‘12.8

11.3

16.4

‘18.3

NRG projected
remaining costs
1

Note: Bes des uncerta nty bandw dtFt,1ï &t

NRG 10w NRG
case
:middle
:case

Li

NRG
high
case

Costs could stili
exceed high case,
as not all (external)
risks are inciuded

42

ldeally, cases
‘\would be
accompanied by
probabilities, see p.
47 & 48 for detail

Potential
maximum

FI

9

projections (Low Case) do not inciude any other
ps9!q’ for unforeseen costsorrisk buffers

Strategy& PwC
Confidential property
Prepared for Ministry of EconomicAffairs
1) Estimations prelimina,y, to be approved by NRG RWMP steerco, excluding PM RAP post for potential optimization and additional characterization resources
2) As defined in J. Boogaards Eindrapportage “Update RWMP Kostenraming’ Source: Strategy& analysis, Eindrapportage “Update RWMP Kostenraming”

Total

Other buildings

Channel
system

Sea drainage

Decom stream

Decommissioning cost uncertainty and NRG projected cost range, in €Mn

Decommissioning related costs could exceed current
provision of€3 7Mn by 90% or even more

0 Decommissioning

—

—

—

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

—30% of decommissioning costs are COVRA
costs at current price levels

NRG estimates that COVRA costs (transport,
interim storage and final disposal) will increase
with 20% due to this change in regulation

The lower threshold only has effect on COVRA
costs (transportation, storage and disposal) and
not on treatment costs

• Extending this to other buildings would result
in an increase of€ —2Mn, assuming:

• A first high level NRG assessment shows a
potential increase for LFR waste costs of —6%,
driven by a 30% increase of COVRA storage
cost

Higher cost of decommissioning

TL

1) ANVS enforces exemption tliresholds per nuclide based on Euratom guidelines
Sourco: NRG estimates; Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG Update 2007; Strategy& analysis

• The effects of this regulatory change have not
been taken into account in NRG’s latest cost
estimations

• This increases the amount of radioactive
decommissioning waste that requires relocation,
interim storage and final disposal

• In early 2018 the exemption threshold for the
predominant nuclide in OLP facilities (Co-60) is
scheduled to change from lOBqIg to lBqIg,
decreasjng by a factor 10

) are
1
• Materials with non-threatening activity levels
exempt from COVRA storage & final disposal

Stricter exemption threshold

Pending regulatory change

43

Impact of2018 regulation changes are not yet inciuded in the
decommissioning provision and could have a €2Mn impact

0 Decommissioning

Low

1.

2.

3.

4

High

4 S.D.
C.S.

HCL 5&62

1.
‘Decom orientation’

,‘

S

//

+150%

biJiÏii

+90%

3.
‘Detailed project study’

4.
‘Decom in process’

+10%

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

1) Excluding LFR; 2) building no. 5 & 6; 3) size of LFR bubbie indicates the remaining share in current provision for since decommissioning is underway; 4) Channel systern; 5) Sea drainage; 6) Other buildings
Sources: Strategy& analysis, Update kostenraming RWMP 2016, Kostenraming en PvA decommissioning nucleaire faciliteiten ECNINRG (2007) Kostenraming Decommissioning Nucleaire faciliteiten ECN-terrein & afvoer radioactief
afval (1996) Onderbouwing update DECOM kostenraming voorz uit 2016.xlsx, update voorziening RWMP uit 2016.xlsx, ‘NRG interviewing’

Maturity of intelligence phase

2.
‘Decom concept study’

,

+30%

NRG reported overall cost
uncertainty: +30% to +100%1)

Theoretically within
:currentNRG
\ .-‘ uncertainty
Nbandwidth

to higher uncertainty
- than NRG current
i estimation

0 Size of bubbie indicates relative provision size

Eg. office
buildings

Complexity
class of
building

E.g.
reactors

Theoretical uncertainty
bandwidth upperbound,
based on theory and
LFR experiences

Building complexity and maturity of intelligence phase

Most decommissioning plans are relatively immature and
cost uncertainties could be higher than NRG’s estimate

0 Decommissioning

44

—-5%

—

v

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

45

Planned
compietion
before 2018

+10%

N/A

N/A

2017

5 8

1) standard ranges usect in NRG ctecom study 2007 and referenced to BeigoProcess expert standard 2: estimation exciudes “unforeseen” item, but inciudes (estimated/secured) permit costs
Sources: : Strategy& analysis, ‘Update kostenraming RWMP 2016, Kostenraming en PvA decommissioning nucleaire faciliteiten ECN/NRG (2007)’, ‘Kostenraming Decommissioning Nucleaire faciliteiten ECN-terrain &
afvoer radioactief afval (1998)’, Onderbouwing update DECOM kostenraming voorz uit 2016.xlsx, ‘update voorziening RWMP uit 2016.xlsx’, ‘NRG employee interviewing’

—30%

—0-150%

Potential
differentiated
uncertainty range
for NRG decom

—80—90%

Yes

No

Yes

Within theoretical
uncertainty range?

2015
---5%

2010

2007

Year

v

Feb. 2016
start LFR
decom.

.r

.
6.1

—-5% to +10%

‘Decommissioning in
process’

—-20% to +30%

LFR deviation with
final amount (Ph 4)

3.0

Feb. 2015
receipt of
permit at €lMn

-40% to +60%

Estimated costs in
)
2
€Mn

-50% to +150%

‘Detailed
decommissioning
engineering study’

‘Decommissioning
concept engineering
study’

‘Decommissioning
orientation study’

4.1

Match?

Theoretical
uncertainty
>
1

Phase 3

Phase 2

Phase 1

Matching of LFR cost estimation stages with theoretical phases

LFR decommissioning demonstrates that cost estimates are
more reliable as disposalpians become more mature

0 Decommissioning

Possibility
linked
reporting

Active
program
management
throughout life
cycle

Holistic
approach
across
disposal chain

Technical
foundation
Test findings with international peers

•

• Clearly differentiate communication and cost projection reporting between
stored (immediate focus) and decommissioning waste (longer-term focus)

• Report cost projections using more industry standard probabilistic models, and
reevaluate requirements for provision level and impact from potential changes

• Enhance RWMP program management capabilities and implement structured
stage-gate process and provide regular updates on costs and maturity progress

• Set-up dedicated and separate RWMP organization and align resources with
defined and agreed objectives and KPls for safe, quick and cost efficient disposal

• Identify potential optimization scenario’s and quantify benefits and synergies

• Include COVRA expertise and cost estimates and ANVS expertise input in
developing safe and economically optimal disposal chain solutions

)
1
• lmprove three party collaboration between COVRA, NRG and ANVS

Leverage all available internal expertise, inciuding e.g. former employees

•

Use multifunctional technical teams to come to creative solutions

1) ANVS can give input to NRG/ECN and COVRA operational planning, using their expertise and knowledge, but will always remain to have an independent safety auditor role as
well; Source: Strategy& analysis
Prepared for Ministry of Economic Affairs 46
Confidential property
Strategy& 1 PwC

Room for
improve
ment

Currently
beïng
pursued

Drivers of cost estimate robustness

Goingforward, we recommend NRG to improve value chain
collaboration, program management and (cost) transparency

0

/

/

/

/

;;ï ;;;;;

Strategy& 1 PwC

Source: Strategy&

Confidential property

lmpact could be significant

cost estimates

(?)

High case Extreme
(—P90?)
overrun

1

Hard to estimate, but
occurance not impossible.

Middle
case
(—P50?)

-

Probabi l ity

F;
probability that the result will
be lower than the Px value

Very unlikely considering
history of nuclear waste

Extreme Low case
underrun (—Plo?)
(7)

Cost

-

ILLUSTRATIVE

Expected cost vs. probability of occurance

•

•

•

stakeholders on how to interpret uncertainty
bandwidths

lmproves transparency in discussions with all

Offers input / guidance for accounting
discussions on what level to hold cost provision

Offers context for technical discussions
during new cost estimation exercises (do we
see this as a cost estimate that would cover
everything 90% of the times?”

Prepared for Ministry of Economic Affairs

this method into its processes

performance data, NRG can gradually introduce

Using developing knowledge and growing

function as illustrative figures for low, middle and
high case cost estimates

NRGs current cost estimations are not made
using such a framework. P-values can only

—

—

—

NRG would benefit of using such a framework
going forward

registry

47

based on an internal, continuously updated risk

uncertainties is through probibalisic estimations

An often used method in respresenting cost

Comments

A known best practice ofprobibalistic cost estimation could
give NRG guidance and improve transparancy

0

1

t’

p:
level

t

;;
X%

P90

Company
level

Program
level

Costs

probability that the result will
be lower than the Px value

P70

-

ILLUSTRATIVE

1) Indicative level, probabilistic cost modeling metbod currently not used in ECN/NRG
Source: Strategy& analysis; PWC’s risk contingency management
Confidential property
Strategy& 1 PwC

NkG

Probability

Probabilistic cost modelling

Company reserve: P70-P90

Program value reserve: P50-P70

Project value reserve: P50

Prepared for Ministry of Economic Affairs

• All AWE’s mandated reserve levels
seem higher than the effective level
applied by NRG, although exact
comparable method is not in use at
NRG

—

—

—

• AWE differentiates on 3 levels:

48

• AWE uses probabilistic cost modelling
to adjust reserve requirement to
the level of uncertainty

• AWE is responsible for the design,
manufacturing and support of nuclear
warheads for the UK’s national
deterrent

AWE’s reserve requirements

Case exampie: AWE reserve requirementsfor different
project leveis rangefrom P50 to P90

0

RWMP

+

—4

—5

—8

Externai

>
1
Other

Consultrng
Services

Current RWMP organization has limited own
staff’ and uses mostly staff from other OU’s

—

—

Program has seen many staff changes over
the last years, e.g.
Departing RAP program lead
RAP operational team transferred to HCL
team

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

49

• Key technical staff is utilized for other NRG
activities and incentives and KPIs appear not
to be fully aligned with RWMP objectives

•

• New fully dedicated program leader has been
appointed in 2016

• Staff from other OU’s are either fully or
partially allocated to support RWMP

•

1) F&C, HCL, ECN-EEE, R&l 2) organization data not conciusive on level of dedication and fulltime equivalency
Source: Strategy& analysis, NRG

—3-4

Staff per OU dedicated to waste activities,
)
2
# FTE, indicative

RW1VIP organization can befurther strengthened by creating
a dedicated organization and greater incentives alignment

0

Strategy& 1 PwC

Confidential property

• Pro-actively develop business cases and
investment proposals for accelerated and/or lower
cost disposal of waste streams in line with objectives

• Provide regularly updates to key stakeholders EZ
& ANVS on RWMP progress vs. defined and agreed
roadmap and cost projections

• Implement a probabilistic cost model and continue
to leverage internal and external expertise (COVRA,
ANVS, 3rd parties) to further improve robustness of
cost estimates

lmplement regular update cycle

• Enhance overall roadmap and timeline per individual
waste streams that is aligned and agreed with key
rd parties)
stakeholders (EZ, ANVS, COVRA, other 3

• Create further alignment on stakeholder (EZ, ANVS)
objectives and agree on metrics and KPls (safety,
speed and costs)

• Develop stage-gate process to progress disposal
plans (for decommissioning and stored waste) through
a structured cycle with dear milestones, requirements
and KPIs in each stage

Implement stage-gate process and road map

Decom has
secondary
priority

Stored waste
has short
term priority

Recommended program management improvements

Prepared for Ministry of Economic Affairs

• Less urgent need since
buildings will be used until
—2027 and beyond
• Deadline known, planning can
be made

• Key subject of public focus:
“stored waste needs to leave
Petten ASAP”
• Activities are ongoing
• Planning is more mature, but
varying per stream

NRG should implement a stage-gate process and report
progress against its roadmap & KPIs more transparently

0:

50

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 4: Organizational andfinancial improvements

Appendix 3: Operational improvements

Appendix 2: Cost & uncertainties

Appendix 1: Introduction

Context & main conciusions

51

Prevent double application of safety margins
Look beyond stand-alone organization
Compare newest technological options

Optimize spread of workload
Combine with future or external streams
Reduce radioactivity

Concentrate investments
Perform activities at location with best capabihties
Allow more time for treatment

•

interim storage or final disposal

waste needs to be
0 Allbefore
it is accepted for transport,

final disposal

the end, all waste will have to go to
0 InCOVRA
for interim storage awaiting

Hard boundaries

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

Note: Hard boundaries were presented by EZ and ANVS. Challenging these boundaries was out of scope for this project, but could be very well be the effect of this reports
conciusions; Source: Strategy& analysis

•

Who:

Eind the most cost-efficient solution, using all
available technology
Allocate activities in line with key capabilities and
future strategy

Reevaluate best party per activity, to:

•
•
•

Reevaluate best place to do activities, to:

•
•
•

Reevaluate optimal treatment timing, to:

•
•
•

Concentrate
capabilities

1 nvestments

Where:

Technology &
activities

What:

activity (e.g. sorting/characterization):

Reevaluate economic trade-offs per

Operational improvement categories across
the chain

52

Operational improvements can be achieved from economie
trade-offs across the value chain within boundary conditions

Store unsorted and uncharacterized
waste at COVRA in Zeeland

Characterize waste for transport
only and do all other activities at
COVRA in Zeeland

3. Unsorted,
stored at
COVRA

4. Sorted &
stored y
COVRA

Strategy& 1 PwC

1

&

0

Hard
boundary?

Confidential property

Sort and restore waste in Petten
until final disposal by COVRA

2. Sorted,
stored in
Petten (MT9

1) MT mid-term (—100 years), ST = short-term (—30 years)
Source: Strategy& analysis, EZ, NRG / COVRA manaqement interviews

Leave unsorted waste in Petten
until final disposal by COVRA

1. Unsorted,
stored in
Petten (ST
))
1

Process in Petten and store in
d parties
COVRA in Zeeland using 3
to compliment technical capabilities

Disposal options

Prepared for Ministry of Economic Affairs

Waste with
highest
uncertainty

Decom
waste &
large parts

—

• Per stream, NRG should
design and evaluate the
optimal solution leveraging
inputs on safety, operations and
costs from other stakeholders
(COVRA, ANVS, others), e.g.:

53

• Of the original scenarios, two
can be neglected as they do not
meet hard boundaries

Possible scenarios

For each stream NRG should design and evaluate optimal
cost-effective solutions leveraging other stakeholder inputs

Strategy& 1 PwC

Confidential property

Source: Strategy& analysis; EZ/ANVS/NRG/COVRA management interviews
Prepared for Ministry of Economic Affairs

• Keep investigating alternative technologies (e.g. resin evaporation instead of
incineration)
• Involve 3rd partjes for more cost-efficient execution

• Investigate how merging decom waste NRG and Dodewaard can create scale
for treatment at COVRA
• Leave “large parts” waste in Peffen for combination with future decom streams

• Inciude COVRA from the start of disposal route planning: prevent rework
because of characterization misalignment
• Ensure early alignment on practical vector analysis, for which start is made
• Use spare available containers from COVRA to speed up the transport

• For special risk streams without current COVRA route available, characterize
waste in Petten only for transport and bring to COVRA
• At COVRA, choose to perform further characterization, or store temporary in
interim storage until routes are further developed

Concrete optimization opportunities to further investigate

Several opportunities to optimize cost and speed have been
identified by ECN/NRG and COVRA during this study

54

NOT EXHAUSTIVE

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

• Prioritize opportunities based on estimated savings
potential

• Execute detailed technical assessment of these
operational improvements involving all stakeholders

Next steps

55

• Any premature estimation of a savings bandwidth would be
overshadowed by the significant current cost bandwidth

• Before such an assessment is made, neither party
indicates that they are able to provide an estimate

• NRG and COVRA agree there is significant savings
potential, but a detailed technical assessment is
imperative to a reliable statement on the size

• Improvement opportunities are stili in an early conceptual
phase, without detailed technical plans

Source: Strategy& analysis; EZJANVS/NRG/COVRA workshop discussions

Uncertainty of savings potential

Currently, COVRA and NRG are not yet able to quantzfy the
savings potential of these opportunities

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 4: Organizational &financial improvements

Appendix 3: Operational improvements

Appendix 2: Cost & uncertctinties

Appendix 1: Introduction

Context & main conciusions

56

COVRA

(b

Financing

Governance

B

Operational

A

Improve financial support structure:
• Review options to find a more structural
solution for financial support, as NRG
struggles to absorb RWMP costs

—

—

Improve holistic value chain view:
• Optimize across value chain, in stead of
pushing problem around, due to
Missing incentives
Missing enforcing mandate

Improve NRG and COVRA collaboration:
• Reduce rework due to misalignment
•
Prevent double knitting of safety margins
• Realign tasks with core competencies
Align incentives to avoid potential
conflict of interest NRG with allocation of
key staff to non-core competency

Improvement options

1) ANVS can give input to NRG/ECN and COVRA operational planning, using their expertise and knowledge, but will always remain to have an independent safety audifor rob as
well; Source: Strategy& analysis, EZ, ANVS, NRG / COVRA management interviews
Prepared for Ministry of Economic Affairs 57
Confidential property
Strategy& 1 PwC

NRG / ECN

)
1
ANVS

ILLUSTRATIVE

Involved entities

Current organizational setup

Realizing the benefits across the waste disposal value chain
requires better collaboration between NRG and stakeholders

Fund1
1

Hist.
Waste
team

Hist. Waste MT

—

waste management team

Cross-value chain historical

• Optimization of situation with limited
changes (org, governance, legal, etc.)

COVRA historical

Ut4 j1

Licensee: COVRA
Operator: COVRA
Steering Committee
Steering:
ECN (or State! COVRA)
Owner:
• Transfer of NRG operational staff and
waste mgmt. capabilities to COVRA
• COVRA responsible for operation
decisions and quality assurance
• Expert team for operational support and
trade-offs (e.g., including ANVS)
• SteerCo approves plans, budget &
investments (ECN or EZ led)
• Optimization of historical waste
synergy value across the value chain
with substantial changes

fTjt

i1!i

EL ECN, COVRA, ANVS

steerin

waste management

Integral

-*
Fund.
L

2

National nuclear waste and

• Requires consolidation of all funds (mcl.
of commercial / 3rd parties)
• Maximization of synergies across total
Dutch radioactive waste Pool with
fundamental changes to NL policy

Licensee: COVRA
Operator: COVRA
Steering: Authoritive body
COVRA or State
Owner:
• As in model 2, plus:
• Historic waste management activities
fully integrated in COVRA operations
• Authorative body optimizes plans and
investment for all Dutch radioactive and
decommissiofling waste

COVRA

Auth. body

decommissiOning authority

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

58

1) ANVS supports NRG & COVRA in its responsibility as policy preparatory and expert. It will remain to have a separate licensing and auditIng role in all three scenarios alike
2) Experts can include others besides EZ, COVRA, ANVS that NRG involves to support business case development (3” parties, international experts, peers etc.); 3) Depending on
ECN carve out results, which were not known yet at the time of this study
Source: Strategy& analysis, EZ, ANVS, NRG / COVRA management discussions

Roles

Licensee: NRG
Operator: NRG + COVRA
Steering: Steering Committee
3
Owner:
ECN / NRG
Characteristics Dedicated NRG waste team and joint
value chain optimization with COVRA
• Expert team for operational support and
trade-offs (e.g., including ANVS)
• Open books between NRG & COVRA to
support investment trade-offs
• SteerCo approves plans, budget, &
investments (ECN or EZ led)

High-level
Structure

1

Alternative organizational structures

—

We identfied 3 modeis to improve organization efficiency
recommended first step invoives limited governance changes

______________________

—

Reporting

1

Reportiflg

rExpes

funding & reporting hierarcllY

Funding!

Hist. waste_____________
management team

Funding i

1
di
ng

Hist. waste
steering
comniittee

Strategy& PwC

—

Corifidential

Normal operationa1 hierarchy
1) Dependiflg on ECN cdive out results, which were not known yet at the time of this study
Source: Strategy&, Workshop discuSSiOnS with CO VRA, NRG, ECN, EZ

ECNI
NRG

• Develop investment cases for cost-efficient
treatment plans across the chain
• Develop overall planning, budget
• Supported by Expert input from e.g. ANVS,
international peers etc.
• Technical operatioflS
• Prepare and support development of
planning, budget and investment cases
• ECN/NRG and COVRA to remain
responsible for quality assurance on own
sites and vice versa on each others
operatiOflS

• ECN
• NRG
• COVRA
• ANVS expert input

• Historical Waste
Team
• NRG
• SubcontraCtOrs

• COVRA

• COVRA
•EZ
(MinFin)

• Safeguard best solutiofl across the chain
• Control historical waste treatment strategy
• Approve budget, planning, investmentS
• Advise on potential state credit support to
supplement ECN/NRG funding

ResponSibilities

PRELIMINARY AND TO
BE FURTHER DETAILED

• 1
ECN/NRG (Chair)

L

AlternatiVe 1

S (parts of) organisatiofis responsible for historical waste

Details of organiZatiOflal structUre

cross-value chain expert input is established

______
______
__

•

•

•

•

•

•

•

•

•

Potential scale and synergy benefit, in
case of additional Dutch Decom waste
streams can be added

Full decision mandate on cost
efficiency tradeoffs with EZ, MinFin,
together with COVRA & NRG
Further synergies & scale by
concentration at COVRA
NRG can fully focus on core activities

Closer cooperation, and management
dedication, no large governance change
Knowledge concentration, by inciuding
ANVS, COVRA insights
Less distraction NRG by fully
segregated & dedicated waste staff
Expert input to ensure economic trade
offs over whole process chain,
Steering mandate with multi
disciplined committee

Pros

Strategy& PwC

•

•

60

Potential scale
efficiencies in the long
run (—2030+), but large
changes needed; only in
case substantial
synergies can be realized
(i.e. on National level)

Potentially more
efficient in long run, but
large changes needed;
requires positive business
case first

Short-term, simplest
improvement of current
situation;
possible to evolve to
alternative 2

Synthesis

Prepared for Ministry of EconomicAffairs

Most operational radioactive waste
streams are already well defined
Requires fundamental change in
policy and ownership of waste,
associated costs and liabilities
Decom chain could already be fully
integrated by COVRA with no need for
further steering authority
•

•
•

Significant investment needed to
expand COVRA capabilities
Complex in case of liability transferal
Possible NRG staff carve-out to new
organization

Steering mandate could be hindered
as ECN/NRG will remain the key
decider as owner of hist. waste
organization
Likely requires additiorial NRG
resources (to backfill staff now
dedicated solely to hist. waste)

Cons

•

•

•

confidential property

Source: Strategy& analysis, EZ, ANVS, NRG / COVRA management inte,views

3.
National nuclear
waste and
decom authority

2.
Integral COVRA
historical
waste
management

1.
Cross-value
chain historical
waste
management
team

Alternative

Evaluation synthesis of organizational structures

This more integratedfocus (model i) could be a good short
term solution before making morefundamental changes

Strategy& PwC

Source: Strateqy& analysis

Expected cum.
cash flow NRG
(excl. RWMP)

—

T

Projected costs
stored waste

NRC cash flow needs to
cover waste costs current
business case does not
aiow any RWMP cost
increases despite
uncertainty bandwidth

ILLUSTRATIVE

...

Prepared for Ministry of Economic Affairs

—

• As a consequence, there are changes required to the
current situation and a more structural from of credit
support should be investigated without compromising on
cost control, polluter pays principle, etc.

•

Confidential property

Uncertainty
bandwidth

—

61

• There is common agreement that ECN’s current nuclear
activities (research, consultancy and isotopes prod uction)
cannot fully absorb RWMP costs and uncertainties
• It is also expected that ECNINRG continues to contribute
to the RWMP disposal costs to the best of its abilities
there will be no deviation from the “polluter pays” principle
• Current situation of repeated credit crisis situations causes
a distraction for all stakeholders involved and does not
contribute to safe, quick and cost-efficient disposal
• It also does not provide a solid basis for maximizing
potential benefits from NRG’s other activities (isotopes,
research and consultancy activities)
• In addition, the government has limited instruments to
improve transparency and ensure execution of the RWMP
in line with its objectives, and...
the state de-facto already provides financial backstops to absorb cost increases which is likely to
continue as RWMP provision does not include
contingencies despite high uncertainty bandwidths
which cannot be absorbed by ECNINRG

ECNINRG cannot fully absorb RWMP costs

Current situation ofrepeated credit crises, lack ofincentives
alignment, transparency and grip on costs is not sustainable

Strategy& PwC

Confidential property

x Clear separation of non-economical waste
necessary to prevent state aid (see next pages)

x Without transparency, proper incentives and
organization alignment there could be a lack of
control and pressure for ECN/NRG to finish within
time and budget and risk of higher costs and lack
of funding coverage from ECN/NRC

x In case of a guarantee, the government would be
obliged to demand market conform premiums for
credit guarantee. The price for such a guarantee is
unknown, but expected to be high which would
increase the cost to ECN/NRC

x Although government would not take over waste
ownership, it would formalize the fact that the state
will take over the specific cost overruns based
on clearly defined and agreed criteria. Whilst this
could set a precedent comparative cases are limited.

Cons: Breaking away from current policy

Rationale for state credit guarantee

Prepared for Ministry of Economic Affairs

investors for medical isotopes business from
improved financial ratios, lower risk profile and
greater operational focus

v’ lmproves NRC’s case for finding external

excellence incentives, when combined with terms
and conditions of a credit guarantee (see next page)

V Can be a vehicle for stronger operational

.requests efforts

v’ Relieves ECN/NRG and EZ of ad-hoc credit

situation where government de-facto provides
back-stop credit support for ECN/NRG

v’ Gives more long term structure to the current

62

Pros: Helping with a more structural solution

More structuralform ofcredit provision should relieve the
financial burdenfor ECN/NRG without being a blank check

Structural evaluation process

Strategy& PwC

Source: Strategy&, PwC UK, UK Case examples
Confidential property

• Periodic review of budget between Hist. Waste MT
and steering committee, including underlying
business cases that require further investment
• Government can decide to incidentally but pro
actively extend further credit based on these
business cases

—

—

—

—

—

—

—

Volumes characterized, treated, transported
• Cost efficiency incentives, such as:
Savings compared to upfront agreed estimate
Personal management bonus incentives
• Safety incentives, such as:
#ofincidents
Downtime key installations
• Signed intention charter between parties on a
“commitment to delivery & excellence”, clearly stating
Shared behavioral principles
Agreed commitments

—

• Performance indicators, such as:
# of staff dedicated to waste organization

Illustrative performance incentives

1

ag.ffaow,o.,oa. .f&i

Cfk.UQ,,tft StOf jt 0t

IP!0000’: ,d&*tttOJb hi,dOcnO .od

yO

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hy ohOlal. nO
25
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Of,Ca.paaca05aOf00o0So2onio fl05

Uînpm,z fl2500 sOfortO4 ach fl& f 020502]2JkOf 2200. .0g0004 tap to0 th00kctt.

10iOft,00Pt1t00,0f, ,ttOoldm&otoorI1nd d,Cv,r,,ofItut q.nhlwoont

0.
ffcit dOnflt

7.LEzoad .011of
:.,o.oo.oHaf.lynafl. .de.ot.O,rn3otktawoogoaaOabI.nb,f
a&atflfhOareO,ükrManMOlrneoa

Crecnuf,z,Lgo ,ffzâ1e £xOot of ECN, ftra$ ,,,fl, cNV.

“Working Together for Safety, Surreoo and Affordabiitv”

SacackidOrca,ofb.h000a.ae

500000 to £00010.10 515110
ANNO

COVRA

•
•

•

04500

3.04 0010J 501010 0=015 00 0090=3

Prepared for Ministry of EconomicAffairs

15’rS0=,

CWOIX0020.Ho .hacb.npsfl,.
Tooflolcohajlap 00001,0005 5500.

02 .02 t.o11,,fltdoft0001 !o.1. 05022 010400.111 of 001W WHO
SIloOf 050000000 aopar400IlOoWo.n.00.022000qS..10900d tOfltfl
lk doofop
o,,ofl .145001001, f,odolh1 12 II. Sofia,
A000fiofol 2fl.1S.0
00,0001 pldo. lof 005.00. of No,,udta

22

Todoildüoo,rIdcpldo.
o,xo’.1k
10
To dev5o 050fl Iccg-t,p.fl1cIpMI.,,00edOio..f0opnpa.

f022.122 do,,. f-trnc .05.1101.1.1.0.1. tltn.00S0.1r

7ocoou.ffo25o0.tCNohopa hta0dtad0iono

SlFOdJ50 3.50. 00135t5f

1
1
1
1

0-1 C.nilT.:

1

-,

1
1
1
1

otaB0.20WNIPZOCWI.s.

-

Example

I CcMA

—

Noclear Vpste Manoneineut AUipnre Cbrter

J4’

Intention Charter

Terms ofsuch support should clearly define objectives and
criteriafor support, governance model, incentives and KPIs

63

1) Excluding HFR, owned by the European Committee. Source: Strategy&, EZ

64

In the case of funding support by the state, or even full takeover of ownership, a distinction needs to be made between waste from
economical and non-economical activities. Further analyses are needed.

•

Prepared for Ministry of Economic Affairs

It is possible for the government to support ECNINRG in funding these costs, as long as it concerns costs for waste resulting from non
economical activities (non-contracted research). Support for any other waste streams might be possible, but specific application of state
aid rules have to be further analyzed for this case. In case the European Commission would stili considered this as non-compatible state aid,
especially ECN/NRG would take on additional burden of repayments including interest

•

Confidential property

), and thus responsible for the cost of treating and
1
As such, ECNINRG is the owner of the stored waste and key facilities in Petten
)
2
storing all resulting waste. This principle of the polluter pays’ is the center of NL and EU nuclear legislation.

•

Strategy& 1 PwC

ECN/NRG, and before that RCN, has been the license holder and operator of the nuclear research facility in Petten since 1963 when the
HER first became operational as part of the Euratom treaty

•

Historical waste definition background

State support is compatible (allowed)for waste that is the
result ofnon-economical activities; Further analysis needed

PRELIMINARY: TO BE FURTHER VALIDATED BY
EZ & MINFIN LEGAL DEPARTMENTS

ECN

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economio Affairs

65

This used to be an accepted way of working by the ECN and RCN board, in which members from the ministry
of economic affairs were represented. 1f we follow “the polluterpays”-principle, then the polluter for the historical
waste, arising from government funded research programmes, is the government

From 2001 onwards, NRG follows the guideline that all waste that arises from research or isotope production, is
paid for by the respective customer. By secu ring of the payment for the waste, NRG accepts the ownership of
the waste. However, this was not the case before 2001: until the late nineties there were no reservations for
radioactive waste.

The historical waste was produced as a result of the research programmes of the Dutch government. At that
time the organization RCN and ECN were operator of the research facilities.

ECNINRG states that:

—

ECN/NRG claims that government is responsible as ‘original
polluter’ however, no legal basis has been provided yet

ECN

Strategy& PwC

Confidential property

Prepared for Ministry of Economic Affairs

Note: ECN/NRG arguments are not wel! documented in any leve! of detail and are not substantiated by facts and analyses (e.g., le ga! or financia! underpinning is not availab!e),
previous recommendation to create a dear benefits case for !iabiity take-over by the State have not been executed
Source: NRG Managemenl Strategy& analysis

Strategy& observation: according to ECN/NRG some form of more structural financial support without
liability take-over by the State could also mitigate financial exposure and associated risks for ECNINRG

—

“The waste treatment process lacks a party responsible for the overall cost control; all parties are fully or partially
owned by Dutch government and their incentives are driven by reducing only their own risk ECN/NRG is at the
top of this chain and is forced to absorb all cost of other parties and/or the cost implications of their decisions”

66

“ECN/NRG is not responsible for the historical waste nor decommissioning costs, as both have their origins in the
time before the creation of ECN/NRG; thus the Dutch Government carries this responsibility”

“The burden of historical waste poses a key risk to the success of Pallas as it deters investors”

“The obligation to have enough revenues from medical isotopes to support the costs of historical waste puts a
risky pressure on the safety required for nuclear processing. Also when NRG is for too long time under a financial
pressure, this could lead to unsafe situations”

“The burden of historical waste jeopardizes the financial viability of ECN/NRG and thereby threatens
unnecessary the supply of medical isotopes to 25.000 patients per day, as the costs of historical waste will not
disappear when NRG is not viable”

—

“The business case for isotope and consultancy activities is positive, but this business cannot carry costs for
historical waste disposal nor is it meant to, as there is no link between commercial activities and the cost for
historical and decom waste”

ECNINRG requests the State to take over RWMP costs and liability

ECN/NRG’s request that the State should take over RWMP
costs and liability is premature not substantiated byfacts

ECNINRG MANAGEMENT OPINION AND STRATEGY& OBSERVATION

Large part of historical waste costs are
outside ECN/NRG control and cannot be
optimized by one company in isolation

Financial ratios and hist. waste risks
disqualify NRG for role as coordinator for
tenders and

•

•

Hist. waste financial exposure and risk
pressure on NRG organization and poses
a safety threat to operations

•

Waste treatment costs will remain uncertain, but simply end-up at other
organizations P&L (e.g. COVRA)

•

External funding may remain difficult due to nuclear and reputation risk (stop
funding of isotopes used in cancer treatments)

Synergies from value chain optimization have not been quantified and potential
positive effect from liability consolidation is unclear

•
•

•

Prepared for Ministry of Economic Affairs

67

The mentioned safety threat has not been quantified or specified by NRG.
ANVS indicates current EZIECN/NRG governance and frequent safety audits have
so far always assured a safe operational environment. StilI, all precautions
should be taken by NRG and the State, that budget scarcity never impacts
investments required to upkeep safety

—

Pallas business plan and financing strategy is still under development and
investor requirements not dear. There could be a potential impact, but currently
there is no stated objective that Pallas should fund any historical waste liabilities

•

According to legal experts ownership resides with ECN not the State
ECN/NRG have provided their opinion, however, with no further legal
substantiation

No business cases have been presented that could not be executed due to
RWMP related liabilities

•

•

Potential economic impact from being able to take the coordinator role is
expected to be very small

•

-

Liability take-over would likely come at a market based risk premium and higher
costs which ECNINRG cannot afford to be quantified

•

—

ECN/NRG is expected to be able to absorb some of the hist. waste related
costs but not all State has provided substantial financial contributions in the
past whilst maintaining the “polluter pays” principle

•

Additionally, hist. waste will remain a burden, especially for operational and
technical staff as long as the waste has not been transferred to Zeeland

•

—

Liability take-over would limit financial crises situations and relieve NRG from
ad-hoc sr. management attention however, this could also be achieved by more
structural credit support in the as-is situation

•

Observations on

Confidential property

ECN/NRG is not responsible for the
historical waste as this originated before
ECN/NRGs inceptiori

•

...

prevent investments in affractive
business cases (e.g., Pallas)

ECN/NRG are not able to attract private
financing as a result of the historical
waste

•

•

NRG business cannot absorb the cost
and uncertainties for historical waste
disposal

•

Historical waste causes a drain on
management attention

Source: Strategy&, EZ, MinFin, NRG & COVRA management discussions

Strategy& 1 PwC

Safety

Legal

Commercial

Financial

Organizational

•

ECNINRG rationale for liability take-over

ECN/NRG’s request is not well substantiated and ignores
critical opportunitiesfor improvement ofcurrent situation

Strategy& PwC

Corifidential property

—

Prepared for Ministry of Economic Affairs

• Transferring the liability, costs and activities will drive significant legal, financial and
other transformatiOfl cost and require (amongst other) substantial operational,
organizatioflal, governaflCe and license changes which ECNINRG cannot absorb
given current financial and organizatioflal challenges

—

—

68

• The party taking over the liability will demand a high risk premium, to take on the underlying
cost uncertainty
Commercial parties or COVRA will demand risk premium which needs to be funded most
likely by additional guarantee of government
1f government takes over liability, it will have to demand a ‘market conform’ premium as well

• Key concern is the possibility to separate waste from economiC and non-ecoflomic
activities (see next chapter)

• In case the liability will be transferred to the state, or partially supported by the state,
state aid issues should be taken into account; details are still under investigatiofl by
the government

• In case NRG no longer bares the direct responsibility for the costs, the government will
need to ensure NRG remains cost-efficient and cannot consider waste contract to
off-Ioad costs from operational activities (backfilling commercial project staff with
steady flow of work needed on waste treatment)

Source: Strategy&, EZ, MinFin discussions

Transition

Risk Premium

State Aid

Loss of incentive

Key risks

In addition, liability take-over would introduce new risks,
increase costs and require a significant amount ofchange

• A transfer of waste could also involve the
simultaneous transfer of (pro rata parts of) the
provision (underlying obligations) and assets
(cash or guarantee)
• This should logically lead to the disappearance
of (parts of) the provision at NRG

• When considering a transfer of movable goods, the
obvious legal title would be purchase (‘koop’).
• The proper transfer/purchase price should be
established and the conditions for the purchase
should be determined.

Transfer

Provision

Legal Title

Confidential property

• Assuming the waste is movable (‘roerende zaak’),
it needs to be clearly identified and
distinguished to be legally transferred
• Secondly, transfer of movable items requires
physical delivery (‘bezitsverschaffing’). This
would be problematic for waste in process within
the WSF or HCL

Legal
framework

Strategy& 1 PwC
Source: PwC legal

• Nuclear waste ownership, rights and obligations IS
primarily governed by the Nuclear EnergyLaw
(‘Kernenergiewet) and the NRGIECN permit
• The acquiring party (mci. any government
controlled body) will need to apply for a permit
under the Nuclear Energy Law

First legal considerations

•

•

•

•

Prepared for Ministry of Economic Affairs

69

Assess comparable, market conform risk
compensation of such a (unique) transfer
Assessment of tax consequence (VAT et
al) and whether a reverse-charge
mechanism would be applicable

Analysis of the terms and conditions on
the provision and supportive loans from
government

Assess which part of the waste is not
moveable (e.g. buildings) and whether
all waste is clearly identifiable
In case part of the waste is qualified as
‘immovable’, it would require
involvement of a civil law notary

Establish requirements by
analyzing terms and conditions of
the relevant permits

Next steps

In any case, a transfer ofownership is premature, as legal &
financial considerations on not yet substantiated

Strategy& 1 PwC

Confidential property

Prepared for Ministry of Economic Affairs

Appendix 4: Organizational &financial improvements

Appendix 3: Operational improvements

Appendix 2: Cost & uncertainties

Appendix 1: Introduction

Context & main conciusions

70

(1,

*.

0

II
z
Ibj

z

ci
-

Radoactive waste project with alpha radiation
Consultancy & services (NRG business unit)

RAP-alpha

High-active solid waste / ILW-high

Medium-active solid waste / ILW-low

Low-active solid waste / LLW

Hot celI laboratories

High flux reactor
High Level Waste (international abbrev. for heat
producing waste, such as used nuclear fuel)
Intermediate level waste (No-heat producing but
medium/high active)

GCO

HAVA

MAVA

LAVA

HCL

HFR

HCL research lab

HCL-RL

Strategy& 1 PwC

International atomic energy agency

Nuclear energy law

Waste transfer unit

WTU

KeW

Waste retrieval unit

WRU

IAEA

Waste stream description

Radioactive waste management program

RWMP

Waste storage facility

Radioactive waste disposal and demolition buildings

RAAVOG

WSD

Molybdeen production facility

LFR

MPF

WSF

Low fiux reactor

HLW
ILW10w/high

Decontamination and wastetreatmentfacility

Common center for research

DWT

C&S

Radioactive waste project

RAP

Abbreviations

Glossary

Event driven foreseeable qualitative risk. Can be
mitigated individually

Risk

Prepared for Ministry of Economic Affairs 72

Unmanageable insecurity (in this context mostly
concerning costs); can only be integrally decreased

Different activities require different methods of
characterization, such as for transport, conditioning and
disposal

.

Technical documentation describing the RAP(-alpha)
treatment plan, agreed upon between COVRA and NRG

Temporary storage at COVRA in the period before waste
is ready for final disposal(e.g., HABOG storage)

Final underground storage for radioactive waste,
currently in research phase

Uncertainty

Characterization

Beleidsdocument

Interim storage

Disposal / end
storage

Terminology

Strategy& 1 PwC

—

—

—

Our summary obserVatiOns alm to commuflicate those matters
which we beeve are important when evaluatiflg the findingS of
our work. They are directional indicators and are not absolute
measures. Whilst inevitablY subjectiVe these obserVations set
the overall context and framework against which the views
expressed in our report should be assessed. The four main
areas we assesS are: 1) scope, 2) accesS to management, 3)
accesS to information and 4) the clarity of information.
Our scope typically ranges from “limited” to “extensiVe”. Our
scope describeS the period covered and gives an overall
insight in the areas covered. Full detail of the scope is
provided in Appendix 1 of the engagement letter.
Access to management typically rangeS from “none” (e.g. no
accesS due diligenCe) to “good” (e.g. open, direct,
unsupervised access to all necesSarY members of
management). Our assesSment is based upon the
transaction proceSS, the level of direct accesS we were
granted to the relevant memberS of management, as well as
our obserVations as to the openneSS of the lines of
communication.
AcceSS to information typically ranges from “limited” (e.g.
only the information memorandum, perhaps supplemented
with some supporting scheduleS) to “extenSive” (e.g. accesS
to all the relevant data, supporting management schedules,
and relevant specialistS). Our assesSmeflt is based upon the
extent to which we actually received the information and had
the necessarY commufliCations during the course of our
work.

Guide for the correct interpretatiofl of the “Our scope and
proceSS” pageS in the report

The clarity of information typically rangeS from “poor” (e.g. no
ability to ascertaifl the performance drivers of the business) to
“good” (e.g. there is a substantial amount of robust and relevant
information that provides meaningful insight about the most
significant risks, trends, and issues of the Target). This
assesSment is based upon our judgemeflt as to how access to
management and acceSS to information facilitate our
understanding of the Target.

t0fEc0fb

redforM

•

•

m0Affair

s73

Our work was carried out on the basis that the information S
reliable, accurate and complete in all material respectS. Unless
explicitlY stated in our report, we did not verify or check the
information with respect to accuracY or completeness. Our work
constitutes neither an audit in accordanCe with any set of
generallY accepted auditing standards nor a review in
accordance with a set of generallY accepted revieW standards
globally, regionallY or by individual territory. Accordingly, we do
not express an opinion or any form of assurance with respect to
any financial statementS, information regarding the Target, or
technical accounting advice included in our report.
We make no representations regarding the sufficiencY of our
work either for the purposes for which our report was requested
or otherwiSe. The sufficiencY of the work we perform remaiflS
the sole responsibilitY of the addressee of our report as are any
decisioflS with respect to the proposed transaction.
Had we been requested to per[orm an audit or additional work,
additioflal matters might have come to our attention which might
be of importance to you.

Basis of our work

•

GuidelineS for the use and interpretati0 of our ReportS

Our report may be shared with your professional advisors solely for
the purpose of assisting you in connection with the proposed
transaction provided they have accepted the terms as stated in the
Contract (Appendix 1). Financing banks may share the report with
their professional advisors solely for the purpose of advising them in
connection with the transaction under the conditions of the release
or reliance letter.

You shall not provide our report, or a copy or part thereof, to any
third party, including financing banks, or refer to us or the Services
without our prior written consent, which we may at our discretion
withhold or allow subject to the third party accepting our terms and
conditions as outlined in a separate release or reliance letter.

Where an investment bank acts as an adviser, it may only use our
reportforthe purpose of advising you. 1f the investment bank
wishes to use the report for its evaluation as to whether to provide
debt finance for or underwrite the acquisition, it may only do so if it
has previously signed our reliance letter.

•

•

•

Strategy& 1 PwC

Our report is supplied on the understanding that it is solely for the
use of the dient, or those persons who have signed release or
reliance letters, and only in connection with the proposed
transaction.

•

Access to our report

74

Our report is specifically written for identified user(s) with whom we
have agreed the scope of work or to whom we have explained the
nature and extent of our work. We will therefore not accept any
responsibility or liability to any unauthorized reader of our report.

•

Prepared for Ministry of Economic Affairs

Except where otherwise stated in the Contract, the release or
reliance letters or unless required by law, no report, in draft or final
form, provided by us, or a copy or part thereof, should be given to
any third party nor should we or our services be referred to without
our prior written consent which we may at our discretion grant,
withhold or grant subject to conditions.

•

Guidelinesfor the use and interpretation ofour Reports
(cont’d)

LÛ

II

8

z

.o
•

t’

1

Strategy& 1 PwC

Source: COVRA

/
1

1

Steering corn mittee
Budget approval,
Planning approval
lnvestrnent approval

Confidential property

COVRA

Full dsdosure of relevant
documents, procedures, policies
betweenparties

by COVRA

1L
Prepared for Ministry of Economic Affairs

waste chain = lowest public cost
No regret invenstments

Responsibilly rnatched to authority
Collaboration of equals
Optimisationoverthe integrated

Achieves:

•

Was te remains wlLh ECN/NRG
Equal say in decision making on
tactical and strategic level
Quality control over supply chain

Premises:
•
•

Sen Mngt level
•
NRG, COVRA
•
Plus supportstaff as needed

Mnt Director level
MïnEZ, MinPlN,
NRG, COVRA

\‘erbeterd alternatIef 1 Temporary project set-up

COVRA proposal

where organizations stay separate under 1 working party

COVRA proposes a variation between alternative 1 and 2,

76

COVRA MANAGEMENT VIEW

2018-Start

COVRA

2018-Mid

2019-Start

2019-Mid

z

Strategy& 1 PwC

Source: NRG
Confidential property

Responsible for costof treatment and storage of waste

Lii

0

z

(0

z
z

COVRA acts upon financing
ANVS+EZ+Fl N supervise

(0

COVRA

coop COVRA = fact
ANVS+EZ+FIN supervise

°-

In charge of technical operations to treat and transport the waste, and setting up the required organisation
Main responsible for nuclear safety adherence in Petten
Responsible for acceptance and midterm storage of the waste

COVRA

COVRA starts preparing
coop ANVS+EZ+FIN

iii

0

z

z

(0

coop ANVS + EZ

2017-End

Operator
Licensee Petten
Acceptance & storage

COVRA

iii

L)

z

start of coop+ANVS

2017-Mid

Owner

1

coop ANVS+EZ+FIN

NRG

start of coop+ANVS

Start

NRG proposal on gradual organisational transition

Prepared for Ministry of Economic Affairs

NRGproposes ci gradual transitionfrom the currentform to
alternative 2, but inciuding a transfer ofownership

77

ECN/NRG MANAGEMENT VIEW

Strategy& 1 PwC

Prepared for Ministry of Economic Affairs

78

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