AF4S31 Strategic Financial Management Report on Nuclear Power Plant

This report delves into Strategic Financial Management (SFM), focusing on the financing of a nuclear power plant. It begins by outlining various sources of finance, including debt financing, equity financing, power purchase agreements (PPAs), and contracts for difference (CfDs), as well as government and corporate finance options. The report then considers wider economic factors impacting the project, such as GDP growth, political and regulatory risks, and labor market statistics. It further addresses issues associated with projects expected to last for 10 years or more, including poor planning, budgeting issues, and inadequate risk management. The report concludes with a discussion of risk management processes and procedures, emphasizing the importance of identifying and mitigating potential risks to ensure project success. The report provides a comprehensive overview of financial management strategies crucial for large-scale, long-term projects.

STRATEGIC
FINANCIAL
MANAGEMENT

Table of Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
Sources of Finance......................................................................................................................3
Consideration of wider economic factors...................................................................................6
Issues associated with projects expected to last for 10 years or more........................................7
Risk management process and procedure...................................................................................8
CONCLUSION ...............................................................................................................................9
REFERNCES:................................................................................................................................11
Books and Journals:..................................................................................................................11

INTRODUCTION
Strategic Financial management is the process of managing the finances in such a way
that the strategic objectives can be met. For success of a project the goals and objectives are
decided. It is vital that there is adequate finance available to manage the the project and its
successful completion (Gunawan, 2019). Managing the finances play a crucial role in success of
the project as finance is considered as life blood of a business. This report is based on strategic
financial management. There is discussion related to various sources of funds that are used to
collect money and use in the project. There is discussion related to various economic factors that
have impact on the project. It is seen that there are issues that are associated with the project and
they last for around 10 years, the issues are also part of this report. In the end of the report risk
management procedural is mentioned as it helps to reduce the risk of the project and complete
the project successfully.
MAIN BODY
Sources of Finance
To start a project and run it efficiently there is requirement of various factors. It is
important to take all the factors onto consideration. One of the most important factor that is
considered to run a project effectively is finance. It is vital to know the sources that will help to
fun the project (Rezaee, 2017). The project here is to start nuclear power plant. It is important to
select right to source to raise money as the success and failure of the project depends on the
funds also. It is prominent to analyse the risk associated with the source of finance as well as
benefit of each sources. As it helps to make a wise choice and fund the project effectively. The
sources of finance available to fund the nuclear power plant are mentioned below.
The two basis ways to financing the project are underneath:
Debt financing: It is a source of finance that involves banks and the other lenders that
provide loan for a given part of the project. It is seen that they take security or some asset to give
the loan. It is important to remember that in case of debt financing the loan is repaid with interest
at a specified period of time and at regular intervals. The advantage associated with debt is that
the risk of lender is limited and it is known as cost efficient type of finance.
Equity financing: It is another source of financing under which the investors are selected
and they fund the project. As they are given shares of the nuclear plant after the project is

completed and becomes operational (Straujuma, Lapiņa and Ozoliņš, 2017). There is risk
involved for the share holder as well as there are chances of profits. It is another point to be take
into consideration that says that equip share holders have greater rights in managing the
enterprise.
It is up to the project requirement the source of finance is decided . As it will help the
project to run effectively and minimise the risk that is present. It is also seen that a combination
of debt and equity is used so that there is benefit.
The long term contract are also used to finance the project and that are mentioned below:
Power purchase agreement (PPA): In case of long term revenue guarantee, PPA are
widely used in the electricity industry. It is generally an agreement between the seller of
electricity and the buyer. the buyers are wholesalers and they require secure supply at a fix price.
It is also important to note that these PPA may or may not guarantee by the government.
Contract for difference (CfD): It is another long term contract. It is a contract between
the operator and a counterparty which may be government (Turshan, Karim, and Ramallah,
2020). In this CfD the risk is shared that the price of electricity is not sufficient and enough to
pay the capital expenditure. It is also seen that the price between the strike price and counter
price is met by the counterparty.
The other ways that are used to finance the project are discussed below:
Loan guarantees: Another way to finance the project is through the provision of loan
guarantees. The grantee varies from one lender to another. But there is assurance of the payment
along with the interest. It protects the lender from certain loss.
Commercial loans: These are the funds that are collected from the commercial banks.
This is a main source of debt financing. These are the loans that are used by them to manage
project.
Government and corporate finance: It is one of the most important source that is used to
finance the project. It is widely used in UK. There are chances when government finances the
project through a mixture of both debt and equity (Adesi, Owusu-Manu, and Murphy, 2018).
The combination is decided by the government that is beneficial for the project and leads to its
success. It is seen that the government (public) or corporate (private) finance are used for
financing the project ans a combination is also based on that.

Public: In this the government uses the money according to the market design. The
government policy decides the public that is government to finance the project. The involvement
of government in the project makes it easier to to raise the money from the cost effective
methods. It is examined that most of the operating plants are financed in this way.
Private: It is said that the companies raise from private and also a mix of debt and equity.
The corporate entity has a large utility. A group of investors finance from the project.
Investor/cooperative financing: It is another way of financing the project. In this case
private investment is facilitated with various cooperative investment models (Sedevich-
Fons,2018). As the group of investors can raise the debt and equity for the project and it helps to
share the risk among them.
These are the various sources of finance that are available to start a project. A proper
research is conducted so that the right way and source to use the project. As it help to gain
revenue from the the operations and capital costs. It is vital to know about these available options
and select among them that will reduce the risk and help to gain benefit of using he source of
funds.
Consideration of wider economic factors
It is identified that in the process of financing of nuclear power plants is not easy as it
depend so many economy factors. So that's why it is important for country that they should
considered all economic factors while financing of their nuclear power plant project. Nuclear
power plant need huge capital investment as compared to thermal power plant. This plant is more
beneficial for economical development as it is the economically viable and clean source of
energy. There are some economic factors that affects affiancing of nuclear power plant are
mentioned below:
GDP Growth
GDP growth rate is the important economic factors that shows the growth rate of country.
UK wants to invest in nuclear power plant so that's why they should focus on their growth rate
because it gives a great impact on the financing the project (Shujahat, and et.al., 2017).
Financing can be possible only when they have a good economic growth rate but it is identified
that after pandemic situation, growth rate of economy is not good which gives direct impact on
financing of nuclear power plant. UK's nuclear power plant is very beneficial for an economy as
it assist in developing the economic conditions very well. UK is expected to grew their GDP by

4% in March 2021 and 7.3% in 2022. But due to COVID-19, economy face a large contraction in
economy growth rate. So that's why it is not easy for funding of nuclear power plant.
Political and regulatory risks
For funding of nuclear power plant in UK, it is identified that it has a risk of political and
regulatory. This plant is the large infrastructure project which needs permission from many
regulators as it cannot be start without there permission so that's why it is important to consider
political and regulatory risk (Loginovskiy, Dranko and Hollay, 2018). It is necessary that they
should take a permission for location, cost, benefits of nuclear power plant so that any political
reasons cannot restricts their path.
Labour Market Statistics
UK invest in the nuclear power plant and for that purpose they need higher number of
labour to start their project in 2030. It is identified that UK government focuses on 35% of
generation capacity will be closed down. So that's why they are now focusing on investment of
nuclear power plant. After closed down of current generation capacity power plants they are now
focusing on labour so that they can appoint person according to the conditions. It is identified
that for that purpose they need to identify labour market statistics that how many labours are
available in the country (Dinçer, Hacıoğlu and Yüksel, 2017). Labour market statistics gives a
great impact on nuclear power plant as it requires lots of labour so that they can start their
operations. UK needs an urgent investment and that's why they need labour for start their new
project such as sheet metal workers, iron-workers, project managers, engineers, carpenters,
welders, etc. All these persons should be available in the starting of nuclear power plant. It is
also identified that it gives a great opportunity of employment in country.
These are the economic factors that are associated with nuclear power plant. It is
important to consider all these factors.
Issues associated with projects expected to last for 10 years or more
There are various issues that occur while starting a project and implementing. The
challenges do not end up at there. After the project is associated there are various challenges that
are faced. It is important to be aware about these challenges and some of the challenges that are
faced by the project are mentioned below:
Poor Planning: It is seen that if the project is not planned in an appropriate way then
there are various problems that arise in the path of project. It is important to consider all the

points that will help to plan the project effectively. A proper research is required so that there are
no problems afterwards, It is also seen that if the planning of project is poor then there are
chances of risk and failure of project in long run. So it is important to plan accordingly and make
development plan for the project.
Budgeting issues: It is one of the major issue that may occur in life cycle of a project. As
the future is uncertain it can be said that the project may face the issue of budget. It is one of the
biggest hurdle on which the effectiveness of the project depends. The money is not used wisely
and there is not proper cost management (Shibani, and Gherbal, 2018). This may cause problem
for the project in future. It is important to manage the finances effectively so that there is no
problem in future. A proper planning about the finance will help the project to accomplish it
successfully.
Inadequate risk management: It is important to manage the risk that is associated with
the project. There should always be a contingent plan prepared. All the future outcomes must be
identified and forecasted. There are various skills that are associated with the project and they
must be identified so that the project do not face any problem in the future. A person must be
hired so that all the risk are identified in the starting and there are no challenges in the future.
Uncertainty: As the future is uncertain and it is not possible to work in the project as per
the plan as there are chances of uncertainty. As there is no surety that the project will go in the
way it is planned. The risk is also associated at every level it is important that there is contingent
plan prepared for future.
nuclear power plant: After some time the personnel and members stop understanding
their responsibility and the roles assigned to them. It creates problems as there is lack of
accountability that causes the project in problem. It is important that the duties and roles are
assigned in an appropriate way (Bondzi–Simpson and Agomor, 2021). The performance of all
the members should be checked from time to time and there should be proper communication so
that they are aware about the problems and challenges that are coming in path. The way to
successfully complete the project is to communicate effectively and assign the work to all the
members.
Lack of clear goals and success criteria: If the goals are not clearly stated then there are
chances of getting unsuccessful. Clarity in the objective and goals helps to achieve the objectives
effectively. It will help to solve the problems that arise in project and its management. It is

important that the there is clarity in goals and objectives that are set and they must be
communicated to the members of the project so there is no confusion or problem in the end.
Above mentioned are the challenge that come in path of a project up to 10 years. It is
important to be aware about these projects and plan accordingly. The project is to start a nuclear
power and if there challenges will be analysed in starting then there are less chances of obstacles
on the project.
Risk management process and procedure
There is always a risk present in a project. It is vital to analyse the risk that is associated
with a project. It is important that the risk is managed in the starting so that there is problem in
future. The steps followed to manage the risk are mentioned below:
1. Identify the Risk: This is the first and foremost step. In this step the risk is first of all
identified. The environment is scanned and all the internal and external factors that are
related to the project and have impact on the project are identified (Lee, 2018). There are
number of risks that are available so in this step it is important to clarify the risk. It will
help the project to know about the risk and then take actions based on the risk.
2. Analyse the Risk: The next step is to analyse the risk that is identified in the first step. It
is vital to identify the scope of risk and to find out the link that is between the risk and the
factors that impact the business. All the environmental factors that impact the project are
analysed. Risk management solutions are identified so that the project is effective and
successful. A map is created that will help to analyse the risk and the factors that are
associated with the project.
3. Evaluate or Rank the Risk: Normally there are number of risks that are associated with a
project. So it is important that these risks are numbered in a series. The risk are rated so
that more focus is given to the risk that are rated high (Gure, and Karugu, 2018). There
are number of risks that are associated and it is not possible to work on all the risk in the
same manner. The risk that have more impact on the business are identified and given
high rate so that they are focused more. Also it help to analyse that which risk is to be
managed at priority.
4. Treat the Risk: The efforts are done to eliminate the risk. The project management team
make all the efforts to wave off the risk that is associated with the project. The expert
advice is taken and in meeting the plans are formulated either to work on the risk or if

possible then eliminate the risk. The efforts are done to identify the solutions out of the
risk and uncertainty so that there is no problem in future (Ergunova, and et.al., 2017). The
solutions are the communicated and all the members that are involved are told about the
responsibilities so that they can work over it. It is time when each and every member gets
the update from risk management team.
5. Monitor and Review the Risk: This is last but not the least step. In the step the risk and
its solutions are monitored in such a way that all the risk and the solutions are reviewed.
The risk factors are again analysed and their impact on the project. In this step the
progress of risk management plan can be identified so that the result are identified
(Altundemira, and Goksu, 2017). As all the risks can not be eliminated and the solutions
for them are identified so in this step it is important to monitor the performance.
The above mentioned are the steps that are followed to manage risk associated with a
project. It is vital to find out the factors that are associated with the project. If the risk is managed
properly then there are more chances that the project will be successful and beneficial.
CONCLUSION
From the above report it can be summarized that it is important to mange the finances.
Financial management is important part of a project as the successful completion of the project
depends in the money available. In the report there is a project for which various sources of
finance are mentioned. It is important to know the source and the benefits associated with the
sources and make a wise choice. Then the economic factors that have impact on the project are
also mentioned. There vis discussion related to he challenges that are faced by the project in the
years. In the end of the report there is discussion related to risk management process. As the risk
at present at every level and it is important for project members to know the risk and be prepared
for it. So the steps that are used to manage risk are also mentioned.

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