Financing of any capital project may be achieved by equity, which means selling shares in a project, or by debt, i. e. borrowing money. An important distinction between the two relates to exposure to risk because lenders will often have first call on the assets of a failed project and may be favourably treated for tax purposes. Holders of equity, on the other hand, are completely at risk to project failure. Because of the reduced risk to lenders, the rate of return on borrowed money is lower than that required from equity. Consequently, project sponsors tend to prefer debt to equity. Conversely, would-be lenders will wish to see that a project has equity financing in place as a means of gaining confidence in the viability of the project and of limiting their own exposure.15 As a result, an equal split between debt and equity would not be an unusual outcome.

Where a government seeks to make a financial contribution to the cost of an NPP this, too, may be in the form of a loan guarantee, a loan or the purchase of equity. As for actually raising the money, governments have many ways of doing this. It may be secured against future tax, electricity or other revenues or, when making an agreement to import nuclear technology from another country, as a form of barter using exportable goods such as agricultural products or uranium ore. Funds may also be raised in advance through a surcharge on electricity sales from existing plant. In a few cases it may be available through a sovereign wealth or infrastructure fund.

Similar considerations will apply with respect to private capital except that the financial options will be more limited. Large utilities may pledge revenues from electricity sales from existing plant as well as the new one to repay debts. Use of on-balance sheet financing will help to demonstrate that the utility has confidence in the project and the financial strength to carry it through.

Until the current financial crisis, at least, global markets were more than adequate to meet the costs of NPP construction. The problem is not the absence of capital but the difficulty of persuading fund-holders to release it.15 The underlying issue is that of risk: what is its source, how great is it and who should bear it? This is explored in the next section.