Joe Coletti  00:04

Welcome to Powering Sustainable Ideas, a new podcast series from RBC Capital Markets, where we interview the leaders and companies powering the sustainable future. In this episode, you'll hear a conversation that took place at RBCs Global Energy Transition Conference in London this past June Politicians have embraced energy as a national security issue. Meanwhile, a recent major power outage in Iberia has focused minds on the reliability imperative too. Is this political will translating into the support that global players will need to deliver power that is secure, dependable, and affordable? Biraj Borkhataria, Global Head of Energy Transition Research, RBC Capital Markets, was joined by a panel of operators working in different parts of the world to answer this exact question: He was joined by Marco Nix, Group Chief Executive Officer, Elia, Andrew Stanger, Price Control Director, SP Energy Networks, Iberdrola, and Rachelle Girard, SVP and Chief Corporate Officer at Cameco. Now, let’s dive into the conversation.

Biraj Borkhataria  1:04

I wanted to start with you know, recent events, and I'll start with you, Marco, there's been a lot of press around what's happened in Iberia with the blackouts, how are you managing your network so that the same events don't happen, and do you think the regulators understand and are the conditions right for you to be putting capital to work?

Marco Nix  1:22

First of all, I must admit and want to reiterate that the grid in Europe in particular, that's something we have visibility on, is being operated quite strong way, in a quite secure way. So to take some of the figures, we have some say in the grid reliability quota, so availability of the components in the grids we’re operating in Belgium and Germany, was 99.8% in Germany, 99.9% in Belgium last year. So that gives a kind of confidence that that there is a quite secure operation. That's being said, taking the investment needs into account. It's a huge transformation, potentially the biggest one we ever seen in the transmission grid, at least in Europe, to my knowledge. With an eye on Iberia, I'm not in a position to judge on that one, but the Spanish Government has disclosed that on one end, there's a kind of less visibility of some evolvement and some prediction behavior in the renewable sphere, mainly photovoltaic, and that's something which we do see all over Europe. It's not only increasing capacities within the countries, but resilient grid is something which, which is the meshed grid, and connectivity to other facilities outside the boundaries of the country is really a privilege to have. And of course, some contrary movement in Europe to be recognized –while the UK, Germany, Belgium, is still keen to interconnect to each other and to other countries, it's less the case in the Nordics for the time being, as they could solve their current issue on their own. But in the long term, it's of course, giving a robustness in a supply to be connected to other sources either. And the last point I will mention here is, of course, that there are procedures in place which might be seen a little bit outdated, as they are quite analogic. So engineers are usually judging zero or one, but there's some truth in this, as, of course, they are sticking to physics. And the reliability on this behavior is a third point which we need to strengthen back as there are some rules which we cannot ignore. And that's something which we need to work on. And as we speak, my company, is working on all these aspects. Of course, we've been seen as trusted advisor to politicians that gives us at least a foot in the door to discuss these kind of procedures and rulings, and they are not being put in place to make the system complex. The system is complex in itself, and we need to deal with that complexity. But in the part of the 30 billion capex program which we are currently executing, there are two other elements which are both to mention. On one end, that we are changing the nature of the grid, so it will be a more active, steerable grid in the future, with elements power electronics, which we have seen in the past, which enables to absorb some of the features we don't like, in some of the productions. And the second is, of course, a huge amount is dedicated to digital solutions to cope with the kind of huge amount of data and with the real time decision being needed to cope with the change of the behavior of the actors in the market.

Biraj Borkhataria 4:22

So maybe move on to you, Andrew. We had slightly different issues in the UK, but nevertheless, issues with substation at Heathrow has led to a much greater focus on this resiliency point that that Marco mentioned. Iberdrola has put out some very substantial targets as it relates to investments in the UK. Firstly, what you're trying to achieve, and then what gives the company confidence in these multiyear targets that you're making these investments over 10, 15, 20 years plus, right?

Andrew Stanger  04:46

So probably just have to cover a bit for context in UK to explain that confidence that we've got. Energy security is a priority, and that's part of national security. So there's a lot of political will with increasing the generation in the UK, the domestic generation. Then you're in the context of there's a big political will for electric vehicles, electric heat, move away from gas, all part of the transition to the net zero. So then layer on top of that, we've got the National Electricity System Operator, and they publish plans, far looking plans and what investment will be required. And we can distill that down to our part of that. So Iberdrola owns the transmission network in central Scotland. There's three transmission owners in the UK, and then they also own three distribution networks. So we've got the benefit of the strong political will, a National Electricity System Operator publishing their plans, and then on top of that, OFGEM, the regulator in the UK is really set out to provide stability, it's a key part. We know that we have got a big investment plan, which we'll touch on later. So they need to create an environment where there's confidence and stability. So we can use the regulatory methodology to then build on top of the investment plan, to then project out what the revenues will require, and that allows us to then have the confidence to go out to the market and explain what we think the demand is going to be. So I could turn just to the immediate period. So in December, we published our Rio T3 business plan, as did the two other transmission companies. Combined in what we are looking to invest is over three times what was invested in the equivalent period, which is known as Rio T2 and that concludes next year. So these are five year price controls. So for the period out to 2031 there's a significant uptake in the investment. It's not the transformation issue, it's a transmission issue, and it's the level of investment and the growth in that network we require to move the generation from where we are the natural resources and to where the demand is down, maybe in the more populous areas in the south of the UK.

Biraj Borkhataria  06:48

So maybe switch gears slightly to you, Rachel. One of the things you've seen on the nuclear side is the customers like Microsoft and Google looking to invest in either existing or new capacity. So could you talk a little bit about your business and what you're hearing from the customer side.

Rachelle Girard  7:01

Yeah, for sure. of course, these are exciting times for nuclear power and for Cameco as a result of that. You know, we're seeing these significant demand tailwinds that are driving this durable and full cycle demand growth, unlike anything we've seen in past cycles. The driver of the those tailwinds really, is the recognition of the critical role that nuclear power has to play in meeting a number of government and industry objectives. We saw countries and companies setting these net zero carbon targets, and then suddenly looking at, well, how are we going to achieve those? And you know, they're looking around for a solution, and suddenly we need base load power. We need it to be carbon free. We need it to be dispatchable. Well, nuclear power fits that bill. And so we've seen now over 30 countries and over 100 companies that have signed and committed to tripling nuclear capacity by 2050. And then from the climate security piece, I think perhaps the more urgent goal that's come forward is energy security and that really was, you know, the result of looking at we need not only carbon free, we need dispatchable we need 24 hour base load power. We need it to be secure, and we don't want to be reliant on other countries for it. And again, nuclear really checks all of those boxes. Then national security comes into the picture. And we've got, you know, countries on shoring of manufacturing capabilities. We've got the investments going into, you know, data centers and artificial intelligence, and the electricity demands that come with that, and then the big electricity demands that are growing as we try to electrify everything. And so we need this. The critical path item for all of that is carbon free electrons. And so we've seen, you know, these tech companies really looking at all of that, and it fits very nicely for them. And I think I just saw a stat the other day that Google projected in order to decarbonize its global data centers, there's a 40% cost savings by investing in carbon free base load sources of power, as opposed to just relying on wind and solar and battery backup. Unlike the past, where our customers are our utilities, we're now starting to hear directly from some of these folks. They're all taking slightly different approaches to how they come to it, but I would say they're, they're really digging and trying to understand both nuclear power, but also the fuel cycle that supports it. When we look at the policy framework, I'm not sure there's ever been a more positive framework for nuclear power than what we're seeing today. And in our industry and our CFO always likes to say that there's never a race for gold in our industry, it's always the race for bronze, because nobody wants to be that, that first mover, because of those first of a kind costs that come with it. So what we're seeing from the executive orders is really it's trying to create the incentives to make it a race for gold. So take away those disadvantages that come with being the first mover. So some of the things that have already been put in place that you know need to stay in place are things like the DOE loan guarantees, you know, let's expand on those and really make sure that the first mover has access to those, to help remove some of those balance sheet risks that they face. Making sure that the investment tax credits remain available to nuclear power, that's a really important piece of it. And then probably the biggest piece is there needs to be some form of cost overrun insurance for that first mover to take away that disincentive to be the first mover, because whoever is the first mover is going to stimulate this really big supply chain response that everybody else is going to benefit from. So let's give them an incentive to do that. Then I would just say, on the sort of the project side, some of the things that need to be done is we need to choose one design, and we need to build multiple units. When we look at the last build out in the US, I think there was 104 reactors built. There were 55 designs. So you're going through first of a kind costs every time. We need to get past that. We need to take one design, we need to build it. We need to get good at building it and build the supply chain around it. And so we're looking at different models too of construction. There are very few utilities that can take on that entire risk themselves. And so they're looking at these consortium approaches, where they're taking, you know, multi user, multi utility and multi investor approaches that can share in those first of a kind costs and the as well as share the end of a kind benefits. And then looking at a coordinated entity to really manage the project risks, so that we're not all competing against, and for, the same resources that you can kind of do it in a more coordinated fashion. So those are some of the things that we think need to happen in order to really see that policy framework help build out nuclear

Biraj Borkhataria  11:09

And maybe I'll stick with you for one more, but it's probably a good opportunity to reference Westinghouse. How does that technology address the needs of US and elsewhere?

Rachelle Girard 11:19

Yeah, so Westinghouse has probably what's considered the best in class gigawatt reactor, the AP 1000. It's now been built, it's existing technology. It's built. You can go and see it in operation. There's two in the US that are operating. China has built a number. And then the four reactors that were built in the UAE are designed using Westinghouse technology. And so, I think in the US, we just saw the announcement through the government of they're focusing on wanting to have 10 AP, 1000s under construction by 2030. And so tremendous opportunities. Obviously, we're delighted with the acquisition, and we think it's going to add tremendous value, and it fits perfectly within Cameco’s strategy and our vertical integration on the heavy water reactor side. This takes us further down the fuel cycle on the light water reactor side. So we just think we're extremely well positioned in this.

Biraj Borkhataria  12:03

Got it. Thank you. And maybe I'll go back to you. Marco, energy affordability, another consistent theme, and probably growing louder and louder in terms of the drum beat. How do you balance that, building a resilient system versus the affordability aspect?

Marco Nix 12:19

Every project in the grid development plan is feeding in the social economic benefit. So there is a positive value case for society. Otherwise we would not execute that. So that's for sure, knowing that, of course, we are not more exposed in the future as our costs are more or less fixed costs. While renewables, for instance, are relatively cheap from a production perspective, they are raising system costs. So it's more a shift of the entire system costs more towards the grids, and therefore we are a little bit more in the light for the time being. Like, for instance, on a Princess Elizabeth Island, there has been a composition of classical connection for offshore wind and on a new DC technology. And we do see that markets are narrow now and DC becomes relatively expensive, that we at least open the box again to question whether another solution is as good as the other one, or close to. One of the tricky things which we do see we are building our infrastructure, raising costs, which we are charging to consumers, which might not be the ones benefiting from that infrastructure in its future. So and that's, of course, a transformation which needs to be justified, and we are doing our best to lower the burden. And of course, it's fair to say that we have some dependency on political and regulatory decision making, as in the past, it was often being seen that by acceleration of procedures, for instance, which we are really appreciated in the permission procedure in Germany, the flexibility we gained with that one has immediately been absorbed by increasing the targets.

Biraj Borkhataria  13:49

And maybe sticking with you. But as you operate in more than one country within Europe, could you just do a little compare and contrast between the regions you operate? Is there a difference in terms of political priorities now, and how has that changed the last few years?

Marco Nix  14:00

I mean, it's fair to say that Germany canceled out quite a lot of options. So starting from coal over nuclear, there's nothing left, so to say. So, everything which we are doing now is replacing the conventional power plants with something else. So that's usually then renewables. But of course, we need to look from a system perspective as well to bring in reliable resources either. While in Belgium, we do see a little higher degree of pragmatism in that regard, as there has been a prolongation of the nuclear being decided, and that is, of course, for the time being a relatively cheap option to do so, knowing that, of course, it's shifting the decision making maybe by 10 years. In general, the way forward in terms of energy system development is towards renewable and accomplished with nuclear in most of the countries in Europe. And that's the way to see not only to boost the energy transition, but to cope with sovereignty and independence from fossil fuel as well. So the rational the arguments might change, but the solutions are still intact. So what is good for us as we are usually investing on a 40 years horizon, and that's why we need to have some certainty that the general path is still intact, and that's what we do see.

Andrew Stanger  15:14

With the unfortunate situation in the Gulf and also in Eastern Europe. that will lead to a desire for more domestic generation, and this is probably across all European governments will have a same priority. So from that, we'll see increasing need for connections. So if network operators like ourselves will have to provide that, just in the next five years, we've got contracted to deliver 19 gigawatts of demand connections in our area, and we're just one of the three transmission operators. The total queue in Scotland is over 100 million of generation looking to connect. So this is going to go beyond the current price control and into the future. The national system operator is forecasting that the network boundaries have to increase to 40 gigawatts. We're currently sitting at six. Over the next five years, we're going to increase it to 16, but then right out to 2040 there's going to be increased investment in to meet the demands and be able to transmit the electricity. So it really will have an impact right across the economy as we seek to make sure we can deliver these investments.

Biraj Borkhataria  16:09

Rochelle, the nuclear industry has a number of sort of national champions, what opportunities does that present for Cameco?

Rachelle Girard  16:16

Yeah, well, I mean, Cameco is uniquely positioned. I would say in our industry, we would be one of the only publicly traded companies that is actually invested across the fuel cycle and into the reactor life cycle as well. Our CEO and our CFO, I would say, spend probably more time outside of the office in government relations meetings than they do in the office, because we're just seeing opportunity after opportunity. And we're seeing in many countries and bipartisan bicameral support in the US, but we're seeing support from many different governments just because of the, as I say, the energy security and national security agendas that have become so important to so many countries.

Biraj Borkhataria 16:51

Can we just talk a little bit about market and particularly supply of fuel? How is the firm thinking about that and the sort of bottlenecks in the value chain and how they can be addressed.

Rachelle Girard  17:400

Yeah, so our fuel buyers always start downstream. So they always start at the reactor. They work their way through fabrication, through enrichment, conversion and uranium. And with what's been going on in the world, of course, it's taking them all downstream, because the concern has been with really enrichment and conversion, because Russia provides our market with a large portion of enrichment and conversion. And so we've seen prices for enrichment and conversion increase quite substantially. Today, conversion prices are at historic highs. We've never seen conversion prices this high. And I think if we go back three or four years ago, $6 per KGU for conversion, we could barely give it away. Today it's at $50 per KGU. Uranium, same thing, it's gone up. But I wouldn't say the demand has made all the way down to the uranium quite yet, because we've been preoccupied with the downstream portion of the industry. But ultimately the uranium is the product to which all of those services get applied. And so eventually that demand has to come back to uranium. And Cameco can provide solutions pretty much through the fuel cycle. The only piece that we don't commercially do today is enrichment, which is on the light water reactor side. On the heavy water reactor side, we provide it right from uranium through to the actual fuel bundles that go into the reactors. It's a business, obviously, that Cameco would like to be in, and we're investing in a third generation laser enrichment technology that's under development, but I would say there's probably enough conversion in the Western world, if all of it were up and running and at full capacity, but there will be further investment required in enrichment and in uranium in order to meet long term demand.

Biraj Borkhataria  18:25

Marco, if we look forward five years and we're talking about this topic, what do you think we would be talking about that we're not talking about today?

Marco Nix  18:31

Of course, Europe is exposed to the Russian threat. No doubt on that. This is, of course, the best insurance to be protected in a system that you have a spread of a production facility which are well connected, and you do see that a little bit in the green, the system was quite robust there. That's being said, of course, digital is something which is more commonly helping the system to be operated in a proper manner. And of course, the exposure there to any security issuance is something which keeps us awake, so to say. Of course, the investments will not be finished in five years’ time. So that will remain a challenge for all companies and for the financial universe as well.

Biraj Borkhataria 19:13

Well, thank you all Rachelle, Andrew and Marco, thank you for your time, and thank you all for listening.

Joe Coletti  19:17

Thanks again for listening to Powering Sustainable Ideas, brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on June 26, 2025. If you'd like to learn more or continue the conversation, please visitrbccm.com/energytransition.