Nuclearelectrica’s shareholders have approved a strategy allowing the company to auction contracts on the Romanian Commodities Exchange for the sale of 400 MW of baseload electricity, with deliveries extending over 20 years, from 2027 to 2046. The package has an estimated minimum cumulative value of approximately 5.6 billion euros, excluding the inflation adjustments that will apply over the duration of the contracts. At the Ordinary General Meeting of Shareholders held on 15 July, the executive management was authorised to organise the procedure and negotiate the contracts with the selected bidders. The final form and entry into force of the agreements will, however, require a new shareholder approval.

The operation is intended to turn part of the future output of the Cernavodă nuclear power plant into a sufficiently predictable revenue stream to support the financing of the Unit 1 refurbishment. Very long-term contracts can provide lenders with assurance that a significant share of the electricity produced after the investment is completed already has eligible buyers and a protected minimum price.

Nuclearelectrica intends to divide the 400 MW into five lots, comprising three lots of 100 MW and two lots of 50 MW. At continuous operation, the volume corresponds to approximately 3.5 TWh per year and more than 70 TWh over the full contractual period. The amount ultimately sold may be lower, as the company reserves the right not to deliver electricity for 45 days per year during planned outages and for ten days during unplanned outages, conditions linked to the operation of CANDU reactors.

BRM is cheaper and more agile than OPCOM

Nuclearelectrica assessed both the Centralised Market for the Award of Long-Term Electricity Contracts, operated by OPCOM, and the BRM platform. The company justified its choice of the Romanian Commodities Exchange on the grounds of lower costs and the possibility of adapting the procedure to the corporate approvals required before the contracts are signed.

The tariff indicated for the BRM platform is 0.01 lei/MWh and will be paid only by the buyer. On the OPCOM platform assessed by Nuclearelectrica, the tariff is 0.05 lei/MWh and applies to both the seller and the buyer. According to the note presented to shareholders, the OPCOM procedure does not include the stage in which both parties obtain their final corporate approvals.

In the competition between market operators, BRM now has the opportunity to manage one of the largest energy contracting procedures organised in Romania to date and to validate its platform for large-scale PPA products. Since 2022, the exchange has operated a market for forward electricity contracts and already publishes transactions involving the physical delivery of baseload products. It has also developed a separate procedure for organising PPA auctions and recently announced the first photovoltaic energy transaction on the Romanian Commodities Exchange.

A price with a floor and a cap

The electricity will not be sold at a fixed price for the entire period. The auction will establish a minimum price, or floor, which will be fixed in the first year and subsequently indexed to eurozone inflation. The price paid each year will be calculated on the basis of a weighted average of market prices, adjusted through the contractual formula. It will not be allowed to fall below the floor or rise above a maximum threshold, or cap. The buyer will also be able to opt for a settlement mechanism that takes into account the results of the Day-Ahead Market during the delivery period.

The structure divides the risk between the parties. Nuclearelectrica secures a protected minimum revenue needed to support the financing, but gives up part of the upside if market prices exceed the cap. The buyer accepts paying the floor during periods of low prices in exchange for protection against very sharp increases.

The formula is designed to make a difficult product bankable. A fully fixed price over 20 years would transfer a very large exposure to one of the parties. A fully variable price would not give lenders the certainty of a minimum revenue.

Less nuclear electricity for the rest of the market

Signing the contracts will commercially lock in up to 400 MW of Nuclearelectrica’s production for the next two decades. The electricity will continue to flow physically through the system, but it will no longer be available to the company for other contracts or discretionary sales on shorter-term markets.

The annual volume, approximately 3.5 TWh before the contractually permitted outages, is large enough to influence the structure of wholesale supply. The effect will be felt primarily on forward markets, where producers currently sell annual, quarterly or monthly products.

The impact on the Day-Ahead Market will be less direct, as only a small share of the contracted electricity would have reached the spot market in any case. The contracted volume does not disappear from the system, but moves from the open market into long-term bilateral commitments.

A price benchmark and a market test

The auction will test whether the Romanian market and international participants are prepared to assume energy-market exposure over two decades.

Even the smallest lot, at 50 MW, represents approximately 438 GWh over a full year. The contracts will require buyers with strong creditworthiness, robust guarantees and the capacity to manage very large financial exposures. The pool of potential participants is therefore likely to be relatively limited, consisting primarily of major suppliers, international traders, energy companies and industrial consumers with stable load profiles.

Nuclearelectrica will negotiate the contractual terms only with participants that meet its prudential eligibility criteria. The contracts will be based on the EFET standard and will include termination penalties calculated at market value, so that an early exit by one party does not cause losses to the other.

The company reserves the right to restart or cancel the process if it fails to contract the entire volume. The procedure will include negotiations on the contractual clauses, an electronic auction session and the final approvals of Nuclearelectrica, the buyers and the lenders financing the refurbishment.

The outcome will provide the market with one of the first clear benchmarks for the value of Romanian nuclear electricity delivered as baseload under very long-term contracts. It will also show the extent to which commercial contracts concluded through an exchange can complement the public and bank financing of the refurbishment. Nuclearelectrica has announced that it secured approval from the European Investment Bank for an 800 million euro loan for the Cernavodă Unit 1 refurbishment project. The project’s final development phase will run from 2027 to 2030 and will involve shutting down Unit 1 to carry out the main refurbishment works, with a focus on retubing the reactor.