“In general,” says the report, “nuclear plant ownership tends to be less supportive of credit quality because it introduces added levels of operating, regulatory, and environmental risk to a business profile. On a global scale, nuclear generation poses a number of risks that are common to all operators.”

The report highlights a number of common themes between Canada, the EU and the USA including a concentration of ownership which, the agency warns, could cause diminishing economies of scale and may negatively affect credit.

With regard to the regulatory regimes, Canadian nuclear operators seem to benefit the most from the safety net of regulation given the heavy concentration of government ownership and participation, says S&P, adding that most European plant owners are not afforded the same level of benefits while the US tends to fall somewhere in between. In terms of decommissioning risk, the report suggests Canada tends to benefit more from its ownership structure and the regulatory environment because the government assumes the decommissioning risk. In Europe, mitigating decommissioning risk varies from country to country in terms of procedures and policies for funding and decommissioning methodology. Also, in the US the split between rate-based and “nonregulated” plants has some implications for future decommissioning risk.

The report also analyses what it terms the “rumbling for the resurgence of nuclear plant construction.” In Canada, the interest stems from a need for more generation capacity in Ontario and a reluctance to rely on coal-fired generation due to environmental concerns. New federal legislation has helped to create interest in the US while in Europe, sentiment varies slightly from country to country although there is some new construction. “In all,” says the study “it seems more likely that the focus on nuclear in these regions will be on life-time extensions and capacity upgrades.”

The report suggests that although there has been no new nuclear construction in the US since the mid-1980s, a resurgence of interest in potential new construction has occurred, mainly from generation owners and supportive legislation from the Federal government. “Still, this support may not be enough to mitigate the risks associated with operating issues and high capital costs that could hinder credit quality,” the study says. Looking at Canada, recent developments surrounding nuclear plant refurbishments do not yet signal a renaissance, but reflect a more practical and increasingly urgent need to plug the widening gap between supply and demand in Ontario, and the replacement of aging assets in New Brunswick, says S&P.

However, in Europe the outlook is bright for nuclear generation with utilities currently benefiting from the high power price environment. Since it is driven by high gas and carbon dioxide emissions allowance prices, nuclear operating margins have increased substantially. The increase in nuclear fuel prices seen in recent years has only marginally tempered enthusiasm.

Furthermore, political sentiments have become more positive toward nuclear generation because of high oil prices, the raising abatement costs for reducing carbon dioxide emissions, and the concerns over security of supply resulting from the dependence on gas imports from non-EU countries.

“But,” concludes the study, “the question is if a change in political sentiments and improved profitability will be enough to result in a nuclear renaissance. Developing new nuclear generation in the deregulated European market environment is a high-risk venture, given the long construction times and high capital costs. Siting issues are likely to be more sensitive today than in the 1970s and 1980s when most reactors were built. Fundamental issues, such as the final storage of nuclear waste and far-reaching social consensus, are still likely to be required before a potential large-scale renaissance can happen.