1. What is AMEC s track record in nuclear? AMEC's position in nuclear, the pedigree we've got goes right back to the inception of not just the UK nuclear industry, but the nuclear industry right round the world. The reputation that we've built up, initially in the UK and Canada, is a really strong brand position when you go into a new territory. 2. What does AMEC do in the nuclear industry? We have found that we can position ourselves at the different levels, so we work with plant owners, regulators, governments and reactor vendors. We also do some work further down the supply chain. Consistent with AMEC's strategy we focus our services on high value engineering, project management and consultancy capability across the lifecycle of the nuclear plant. This is because it's where we think we can differentiate, and make a real difference for our customers projects; also the margins are better in that part of the value chain and the barriers to entry, as regards breadth and depth of capability and pedigree, are higher. We don't take on massive lump sum EPC turnkey fixed price projects, because those are at the other end of the risk spectrum to our business model. Another element of our approach is to make sure that we have long term relationships with customers. We don't want to be just a transactional organisation coming in and doing a task and then moving on. We feel like we can add value to a customer from a long term relationship. Most customers in the market recognise that in a reciprocal fashion as well - we help them to re-engineer their business and help them to do their business more effectively, and vice versa. At the moment around 10 per cent of our business is new build, about 60 per cent on reactor support and operational support and about 30 per cent on decommissioning and clean up. Each part of the lifecycle is growing. The skills and capability that you have in one area map across to the other parts of the sector as well. And many of our customers don't just work in operational support or decommissioning, so you can build a deeper and broader relationship with the customer. 3. How big is your nuclear business? Revenues last year were just shy of 300 million, roughly 7 per cent of AMEC's turnover. Nuclear margins are above the average in terms of AMEC profitability, so it is a good business to be in. We also have a 36% share in NMP, which pays us a dividend, depending on its performance at Sellafield. We've got roughly 3,000 nuclear qualified people, roughly 1,000 in Canada and the US and roughly 2,000 in the UK and Europe. The business is growing well organically, and we've also made some targeted acquisitions, where we believe they either get us into a new sector in the market, a new segment of the market, or into a new geography as well. Page 2
4. How does the nuclear business fit into the rest of AMEC? Increasingly we're utilising the skills and capabilities that exist in other parts of AMEC. So for instance there is an increasing movement of people (in both directions) between nuclear and oil & gas markets in areas like project management expertise. But also bringing some of the techniques and tools as well, so some of the design tools can be mapped across, we can share best practice, and also some of the construction techniques where you might modularise plants can also be brought across from the oil & gas sector, so that's increasingly happening. 5. What is it like operating in the nuclear sector? I think nuclear is probably the most regulated industry on the planet. Oil & gas is heavily regulated too but nuclear is probably the most regulated one. What that means is that any company out there that's operating in the nuclear market, particularly the site operators, whether it's an operational reactor plant or a decommissioning plant, the thing that's absolutely at the forefront of those guys' minds is the safety of their plant and the performance of the plant. And the cornerstones for them are nuclear professionalism and the quality standards that are applied. So when they work with partners in their supply chain what they're looking for are companies that have got the equivalent level of safety approach, the equivalent level of nuclear expertise. So they want companies who will partner with them for the long term, companies that have got the quality and quantity of nuclear expertise in terms of breadth and depth. So when you look to the key nuclear players, that's the hallmark that stands the successful companies apart from the less successful companies. And the term that you'll hear a lot of is SQEP, Suitably Qualified and Experienced People. And a measure of the capability of a company is the number of SQEP people that it has, so resource is absolutely fundamental - the resource that a company has is fundamental to success in this market. 6. Are nuclear regulations the same around the world? All countries strive for a high nuclear safety standard. The way in which this is achieved by either a prescriptive regulatory approach or a non prescriptive approach varies between countries. The knowledge of these different regulatory approaches is a competitive edge for us. This is a big opportunity for AMEC. For example in the UK, anyone investing in new nuclear build needs a local partner to understand how to get the design licensed there. So they need somebody who has got the local regulatory knowledge and that's where we have capability. We also have that capability across Europe and in North America. Page 3
7. Where do you feel major risks are for your business? The market-wide risks are political uncertainty or another event like Fukushima. For us - it s reputational risk. All of the nuclear sites that we work on are covered by the Vienna, Paris Conventions so governments ultimately take nuclear hazard risk. The issue for AMEC in working on any big programmes, whether it be in North Sea oil or the nuclear market, is our reputation risk. It s frankly down to the quality of the delivery that you give to customers. And we keep an absolute focus on three things safety, quality and customer relationships, and they are the cornerstones of our business. 8. What are the drivers of the nuclear market? The nuclear market in particular is driven by political decisions and we quite often talk about what we call a trilemma, three things operating sometimes in concert and sometimes in tension. One, nuclear is a very low carbon emitter - various governments have commitments to reduce CO₂. Two, security of supply, most countries are worried about being reliant on somebody a few hundred miles up the road turning your gas supply off, or suddenly putting the prices up. Three, price competitiveness: for consumers and industry to be competitive out there in the world marketplace is a critical issue. And nuclear can actually work to all three of those, it depends how it's done, but it can work and play successfully to all three of those drivers. Fukushima, a terrible accident happened a couple of years ago - everybody is aware of that. And there was a risk that just like Chernobyl 30 years ago people would think the nuclear industry would grind to a halt. But it's been interesting to see how different countries have reacted in different ways. So after Fukushima, we found that the balance of our work began to change; for instance Germany is now clearly a decommissioning market opportunity, and France looks like focusing on life extensions, whilst the UK is forging ahead with new build. Shale gas in North America has had an impact in nuclear too; many nuclear stations are now looking slightly uncompetitive in the States. So now there will be a case probably not for new nuclear build, but for more lifetime extension. So the company we bought in the States recently is nicely positioned for that. The global financial crisis - it's clearly affecting balance sheets for utilities around the world, making it harder for them to invest in nuclear. In the UK, Centrica pulled out of new nuclear build, but now EDF will be supported by various Chinese investors coming in. 9. What does the future of nuclear look like? Without a doubt it will continue to be a significant part of the global energy mix. At the moment nuclear is about 12 per cent of the world's energy mix and most people say it's likely to be about the Page 4
same going forward or it's going to increase in percentage terms because of some of the CO₂ drivers, reduced fossil fuel supply, etc. For that to happen there will be need to be many new reactors built. But the operational support is a great market for us because the utilities that have 10 or 20 year old reactors would much rather keep those running for another 30 or 40 years than they would invest in building new. And when they come to the end of their lives we will be ready to decommission them as well. As we said before, each country will be different. Germany is pretty much at one end of the spectrum, where we expect the decommissioning of all their plants in the next few years. At the other end of the spectrum you've got countries like the UK, the Middle East, some of the Asian countries that are steaming ahead with the new build programme. Then in the middle you have France. There's a programme called Le Grand Carenage - where they're going to spend tens of billions of euros over the next 20 or 30 years in extending the life of their reactors. 10. What is AMEC s nuclear strategy? We made a deliberate choice not to try and tie ourselves to a particular reactor design. It's a deliberate choice to try and work with as many different utilities, or regulators, or governments as we possibly can, right round the world. We've got really good positions in the UK and Canada and have been extending into Central and Eastern Europe. We ve got the local knowledge of how to get things done in each of those countries as well. When we go to a country that doesn't have an indigenous nuclear programme they want to work with an internationally credible company. Our nuclear pedigree and breadth of experience gives us that credibility. 11. What is AMEC s role in reactor support? Across our core markets in the UK, Canada and the US we provide support to demonstrate the continued safety of the plants, to increase the plant performance and to extend the plant life. Our support is generally provided via framework contracts which run for up to five years, with a chance to renew them via a competitive process. So if you take the technical support contracts that we have with EDF in the UK they have been running for a couple of decades. Some customers are now starting to look at end-of-life contracts, so rather than doing a framework for three or five years it s: how can we do something different from now until when the reactors will be shut down? It s about trying to get the best effective support they can to get the best out of their plants and the best out of their supply chain over an extended period. Page 5
We re strong in Canada on reactor support too with OPG. Very much like the relationship with EDF, this is a very strong relationship. And the work seems to flow well; the respect for each company from each other company is high. The new build in Canada is really going to be a refurbishment programme of their existing CANDU reactors. We are well placed to pick up a sizeable part of that refurbishment market, as well as help OPG look at technology for the future. In the US we have a niche position, since we acquired MACTEC and recently AES. We do key technical services, structural analysis - a lot of the nuclear reactors in the US will have either undergone power upgrades or are now undergoing life extension or post Fukushima reassessments. 12. What is AMEC s role in UK new build? We already have a contract with EDF. Not surprisingly EDF have been spending only modest amounts of money over the last couple of years as they've got the strike price agreed. Now that's sorted they need to take the final investment decision and any EU reviews would need to be completed. For Horizon, we are one of three companies who have just signed framework agreements for engineering support. The value of work for each reactor is about 8 billion, and we reckon between 5 to 10 per cent of that might accessible to AMEC services. 13. What s AMEC s role in clean up? Sellafield was our first big win at Tier 1. We have also bid for the Tier 1 position at Magnox and we do some of the specialist Tier 2 & 3 decommissioning work for some Eastern European utilities, in Slovakia, Czech Republic and at sites such as Chernobyl. For these jobs there are two different approaches needed. If you run a Tier 1 contract like Magnox or Sellafield the key capability comes from a cadre of very senior change managers and change leaders. For the Magnox bid, we are part of the only all-british combination that's got the inherent knowledge of the reactors and how they were built: so we can take them apart more effectively than anybody else. At the other level if you do tier 2 or 3 jobs you need a significant number of people, often running into the hundreds, to bring the full breadth and depth of skill required for the tasks, something which AMEC with its 3,000 SQEP d people is ideally positioned to do. 14. How does AMEC develop its nuclear team? We have some very senior and experienced people. They want to work for AMEC because we have some great contracts which make their jobs interesting. For instance, the person who used to run the UK Regulator, Mike Weightman, is a colossus on the international nuclear regulation stage and everybody respects Mike. Mike joined us about two months ago and he chose to come and work with us and not with other organisations out there. That was quite a powerful symbol actually. Page 6
We recruit into our teams at all levels, from graduates to experienced engineers, scientists and project managers. For example, we've got a very strong graduate recruitment programme. We're recruiting well over a hundred graduates into our European Clean Energy business next year. They are the lifeblood that will be here for the decommissioning projects in 20, 30 years' time. For more experienced people we recruit from the existing market, and also from other regulated industries, where we bring in high calibre people and train them over a period of time in nuclear issues. We also announced a couple of weeks ago we've just formed a partnership with the University of Manchester, a leading nuclear research university, so we can develop the talent of the future and also tools and techniques that we can jointly develop and sell out there to the market. 15. What s the outlook for nuclear at AMEC? We see a good growing long term market. Politics can affect the timescales, but it s not a matter of whether it happens it s when it happens more than anything. We think we ve got a pretty good position in our home markets and we are developing more in the overseas markets that we work in. We ve got a nice blend between the parts of the asset life cycle, and well developed long-term partnerships. So, the market is there and we re in a pretty good position; it s now a question of how we capitalise on that, and the growth trajectory that we can drive. Page 7