This thesis is a comprehensive exploration of the non-technical factors influencing the
economic and financial viability of large-scale projects, specifically focusing on water
desalination facilities coupled with nuclear power sources.
Four key conditioning aspects have been meticulously identified and assessed:
Technological Solution Choice: The study encompasses the comparison of different solutions
of nuclear-powered energy sources (new Nuclear Plants, extension of lifetime of operation of
the existing fleet, and the new Small Modular Reactors) providing a nuanced understanding of
how technological choices, utilizing LCOE as the most suitable metrics for comparison between
different technical solutions, impact economic efficiency and overall project viability.
Non-technical factors affecting the project’s viability: The research scrutinizes how the
multitude of conditioning factors affect how the Overnight costs and financing costs are set for
a certain project, or how the WACC is calculated depending on the stakeholders’ interests and
decisions. Extrapolation of how the external decision that determine for example energy and
environmental policies, market regulation policies, or appreciation by financing institutions of
the risk inherent to projects (for example if it is a first of a kind), or the risk associated to
potential construction slippage effect the expected discount rate and the resultant viability
compared to alternates. It is seen for example that in this capital intense project and lower
operational costs, delays in the duration of the construction have a big impact in the economic
viability compared for example to the total duration of operation.
External or Environmental Factors: Conclusions from first steps of the thesis supports the
assumption of considering the WACC as a metric for comparison of the financial interest or
viability of the project. The studies developed, focus on assessing how external factors such as
political, environmental, global market or risk evaluation can influence the project’s financing
structure and the resulting WACC.
The studies have focused on calculating the different WACC values and comparing the different
hypothesis with the aim of taking conclusions of the effect of the external factors in the viability
of a large-scale and risky project. The data and information available were obtained from
international organizations or information from particular project.
To have as much of a holistic assessment and evaluation, five different assessments have been
carried out allowing to extract conclusions from them:
- Effect on the WACC while only taking into consideration the country risk, as an
example of how the same project just few kilometres away on the other side of a border
can have totally different conditions.
- Effect on the WACC following the Share of Equity and Debt, as an example of how this
repartition and the consideration of the cost of equity and the cost of debt effect on the
final potential outcome.
- Effect on the WACC of the country risk premium, as an example of how simply the
values of the country risk premium, as a parameter of the global status of a country’s
economy, can affect the viability of the project.
- Effect on the WACC of the country’s tax rate, as an example of how policies and
regulations can benefit the project feasibility.
- Effect on the WACC of the risk-free rate, as an example of how the global economic
context and geopolitical factors influence.
Contracting Models and Risk Management: The study seeks to present an assessment and
comparison between two existing contracting models employed for either large infrastructure
such as the RAB (regulated asset based) and the CfD (contract for difference) which is largely
employed and expanded for renewable projects. Both models differ principally in the allocation
of risks, but also one of the main differences between is that with the CfD revenue will only be
available at construction’s completion, whilst with the RAB the operators benefit of revenues
during the construction. The study proposes and sets out a methodology, based on the definition
of the LCOE, which allow the comparison of both contracting models for the purposes of this
thesis.
In addition to the exposed here above, always with the aim of studying the feasibility of a project
for large-scale desalination plant powered through nuclear power, the thesis intends to
undertake a comprehensive evaluation and comparison of project viability in two distinct
international contexts that complement the more financially related assessment previously
developed.
First, through a PESTEL analysis comparing Spain and the United Arab Emirates, experiencing
both countries similar potential issues related to water scarcity. The PESTEL analysis will allow
to understand the two very different contexts for countries that indeed are referent in the water
desalination industry. Subsequently, a SWOT analysis also for both countries is performed,
illustrating the nuanced differences and specificities affecting project viability.
This complements the economically focused assessment, providing a holistic understanding of
the multifaceted factors influencing the economic and financial feasibility of large-scale
projects integrating nuclear power and water desalination.
The thesis aims to offer valuable insights for stakeholders and policymakers involved in such
complex ventures.
