Pillsbury and EFI Foundation (EFIF) Launch Joint Report to Kickstart Advanced Nuclear

The report, entitled “Cost Stabilization Facility for A Portfolio of Advanced Nuclear Energy Projects: A Model Term Sheet,” is designed to help investors and developers mitigate uncertainty risks associated with new nuclear energy technology.

The United States faces the critical challenge of ensuring energy security, driving economic growth and fostering innovation to meet the demands of a rapidly growing energy market. Nuclear energy offers a unique opportunity to address these priorities while delivering clean, reliable and scalable power to meet surging electricity demand. With the U.S. electric grid poised for continued massive load growth over the coming decades, the need for clean, firm power is more urgent than ever.

As outlined in the new report, the Cost Stabilization Facility, bolstered by Pillsbury’s model term sheet framework, would enable a loan guaranteed by the U.S. Department of Energy to cover cost overruns from a portfolio of projects. This would be available to groups of at least three projects using the same technology. These multiple-project “order books” are expected to result in learning between projects and enhance the development of nuclear supply chains, leading to reduced construction costs and schedule uncertainties with successive builds.

Jeff Merrifield, a Pillsbury partner who leads the firm’s nuclear team, and who served as a former Commissioner of the U.S. Nuclear Regulatory Commission, stated that “this framework enables and accelerates the ability of a diverse group of utilities, industrial or high-tech companies to collaborate in the deployment of nuclear reactors by levelizing the risk of new construction and avoiding the burden of a single company bearing the entire first-of-a-kind risk for building a new nuclear unit.” 

For two consecutive years, Pillsbury teams led by Merrifield were recognized as the Most Innovative Law Firm in North America in the Energy Transition (Financial Times, 2023 and 2024) and were also ranked among the elite by both Chambers USA and Chambers Global as possessing one of the world’s top nuclear energy teams—a trailblazing practice with a track record full of firsts for more than 50 years.

Since then, Pillsbury’s lawyers and related professionals have worked on a wide variety of nuclear energy projects, both large and small, and related matters and their financings in more than 30 countries on six continents. Today, the world’s largest and most preeminent nuclear energy practice, Pillsbury has the deepest and most recognized global nuclear energy team, possessing the specialized knowledge and historical perspective to help clients take full advantage of opportunities in this complex and critically important field. To learn more about Pillsbury’s Nuclear practice, see here.

Background

EFIF, helmed by former Department of Energy Secretary Ernie Moniz and supported by Pillsbury, has proposed a series of concrete, actionable policy recommendations to address barriers to deployment of small and large generation facilities.

Investors and other stakeholders have held off on investments in new nuclear facilities due to the cost magnitude and cost uncertainty associated with projects. This “first-of-a-kind” (FOAK) risk stymies advancements, as it may take some experience on the initial installation before later projects can realize their full benefits. 

This is where EFIF’s orderbook proposal comes in. An “orderbook” is an alliance of generating plant purchasers making firm commitments for multiple, identical installations of a particular design. The orderbook members will procure the fleet of reactors and share both the learning curve and the economic risks and rewards, rather than expecting an unlucky first buyer to bear all the FOAK downsides. The orderbook budget will include contingencies that the buyers will share, reflecting a common risk management and construction strategy. A backstop financing will still be needed to induce those commitments.

And that is where today’s announcement of terms for a Cost Stabilization Facility (CSF) comes in. A lender can offer CSF credit on favorable terms, stretching over the long useful life of the facilities, to provide liquidity if an orderbook collectively faces costs exceeding the agreed budget.

Pillsbury, led by Merrifield, worked with EFIF to develop the CSF term sheet. This borrowing is triggered by the orderbook alliance only if the lender’s independent engineer certifies that the accumulated orderbook cost will exceed the committed budget inclusive of contingencies. Developers, power purchasers, investors, utility commissions and ratepayers will all benefit from this attractive capital source, and the sponsors for the orderbook can proceed with confidence to procure and implement the next wave of advanced nuclear technology.