How the support model for financing new nuclear energy works

Investment in nuclear energy is associated with financial risk, which results in higher return requirements among private investors. Financing cost is reduced by central government being able to offer loans at concessional terms, long-term hedging arrangements and sharing project risk. This makes it possible to attract the investment needed in new nuclear energy that can deliver electricity to customers at reasonable prices.

Conditions for aid

Aid can only be granted to companies whose activities are limited to the construction and operation of new nuclear reactors for which companies apply for aid. No other activities may be conducted. Existing companies with ongoing activities that wish to apply for aid must therefore establish separate project companies to this end.

Another requirement is that planned nuclear reactors for which aid is sought must be located in the same area in Sweden and have a total installed capacity of at least 300 MW. If there are special grounds for doing so, the Government may decide to provide aid even if the reactors have a lower total output. Companies must also apply for a permit to construct, own and operate a nuclear reactor or reactors and for required environmental permits prior to the Government taking a decision regarding aid. Applications for such permits are handled by Swedish Radiation Safety Authority and the Land and Environmental Court.

A three-part aid model

Aid is provided in the form of government loans and two-way Contracts for Difference (CfD). Both these parts provide financial support at different stages of a project. The sections below explain how government loans and two-way CfDs work. The third part is a risk and profit sharing mechanism. 

Government loans

A company in receipt of aid does not earn any income from the sale of electricity before a reactor enters service. Therefore, investment costs need to be financed with loans and the injection of share capital.

Government loans are provided for the construction and testing of new nuclear reactors, and for planning and other preparatory measures. Aid is calculated on the basis of costs arising from the time a company applies for such aid. It is not possible to borrow the full investment amount; rather, an injection of share capital is also required. Terms and conditions for aid are regulated in loan agreements between central government and companies that apply for and are granted aid.

Because there are long lead times before investment in new nuclear energy starts generating revenue, the financing cost associated with private lending in the absence of risk-sharing constitutes a significant proportion of the total cost of a project. Benefiting from the Swedish government’s low borrowing costs and passing the credit risk to central government reduces the financing cost, which in turn reduces the cost of producing electricity from nuclear power.

Government loans must be repaid
Government loans are indeed loans and must be repaid to central government once a nuclear reactor enters service. Repayment periods are regulated in the loan conditions but must never exceed the expected operational life of a reactor. As a basic premise, loans are repaid earlier, for example by having a shorter maturity than the expected operational lifetime of a reactor, or by structuring lending conditions in a way that creates incentives to replace government loans with private loans at an earlier stage.

Two-way CfDs

When a reactor becomes operational, the company receives market revenues that can, for example, be used to meet operating costs, amortise government loans and pay dividends to the owners of the company. Two-way CfDs reduce market risk, i.e., the risk that future electricity prices will not generate sufficient returns for the company. CfDs ensure both a minimum remuneration to the company during the period reactors are commercially operational, and that any excess profit is transferred to central government. Similar to the loan agreements, the terms and conditions for CfDs are regulated in agreements between central government and the company.

How two-way CfDs work
Two-way CfDs are a form of hedging arrangement that apply when a new reactor has entered routine operation and has been licensed to produce electricity at full capacity. Two-way CfDs are financial in nature, meaning that remuneration is calculated based on a strike price for electricity and a reference capacity for the reactor.

If the average annual electricity price in the bidding zone where a new reactor is located is less than the predetermined strike price, the company receives remuneration for the difference from central government. If the reverse applies, and the average annual electricity price exceeds the strike price, the company must pay the difference to central government. Agreements are thus two-way. 

Risk and profit sharing mechanism

The terms and conditions for aid also include a mechanism that governs risk and profit sharing between the company and central government. The mechanism aims to provide the company's investors with some protection against risks that could negatively affect the project's profitability, in exchange for the state sharing in the upside in the event of favorable project outcomes. Such protection lowers investors' required return and therefore the cost of financing the project. Once a new nuclear reactor has been in operation for a certain amount of time, a review of the company’s returns is conducted. The risk and profit sharing mechanism is activated or deactivated depending on returns in relation to a predetermined interval.

The terms and conditions for government loans and CfDs can be temporarily amended so that returns on all or parts of invested share capital in the company fall within the predetermined interval. Assessments of returns on invested equity in the company are made based on a predefined valuation method. The number of assessments and their timing and valuation method are defined in agreements between central government and the company. 

Government ownership

In addition to state aid there may also be grounds for central government to become a co-owner through share acquisitions in a company that invests in new nuclear reactors. If central government does become an owner, it is on conditions that are comparable with other owners of the same company. Central government’s ownership shares should not be so large as to undermine other owners’ incentives to ensure the effective implementation of projects. 

The process for obtaining aid

The Act on state aid for investments in new nuclear energy enters into force on 1 August 2025. From that date, companies that are interested in receiving state aid to build nuclear reactors will be able to apply to the Government for support. A new ordinance, which stipulates what is to be included in applications, was approved by the Government in June 2025.

Detailed information on the application process can be found here:
The application process for companies wishing to apply for state aid to invest in new nuclear power

Background regarding state aid for investment in new nuclear energy

• In December 2023, an Inquiry was appointed, which, on 12 August 2024 presented a memorandum entitled Financing and risk sharing in investments in new nuclear power (Fi 2023:F) to the Government.
• On 27 March 2025, the Government submitted the Financing and risk sharing in investments in new nuclear power Government Bill to the Riksdag.
• The Riksdag adopted the bill on 21 May 2025.
• The Act regulating the basic conditions and forms of state aid for companies for investments in new nuclear reactors in Sweden will enter into force on 1 August 2025.
• An ordinance containing supplementary provisions to the Government Bill will also enter into force on 1 August 2025. The ordinance contains provisions on what applications must include.
• Companies interested in state aid can apply from 1 August 2025.