Utilities place bets on USEC for nuclear fuel

Half the capacity of the $3.5 billion plant, not yet built, is said to be sold

USEC (NYSE:USU) announced that it has customer commitments to purchase more than half of the planned, initial sales of the American Centrifuge Plant (ACP). The commitments, valued at $3.3 billion, are from 10 customers. The customers include Exelon and Tokyo Electric Power Company. Both firms are, respectively, the largest nuclear utilities in the U.S. and Japan.

The announcement indicates utilities, which have also bought forward looking contracts in both the LES uranium enrichment plant in New Mexico, and Areva's Eagle Rock facility in Idaho, are spreading their bets with an view that all three plants will be built. Areva has told business groups in Idaho that it has forward sold the capacity of its plant and has commitments for most it. However, it has not broadcast that fact in a press release like the statement this week from USEC.  For its part, LES, which has not applied for a loan guarantee, and has a plant under construction, has announced it is so sure of the market that it will double the size of the plant following completion of the initial construction phase of the $2 billion facility.

The announcement of utility commitments to USEC, which comes well-ahead of a decision by the Department of Energy for a $2 billion loan guarantee for a uranium enrichment plant in the U.S., may be seen as a possible signal to the government that USEC has a viable business case for its facility.

Both USEC and Areva have applied for the loan guarantees, and both firms have to make the business case that their projects are "investment grade" and not fly-by-night speculative ventures. USEC has been reported by USA Today to have “shaky finances” and recently stopped most of the $1.2 billion in construction work at the ACP while awaiting a decision by the government.

Evidence that USEC's announcement is at least in part aimed at lobbying the Department of Energy comes from this statement by USEC CEO John Welch (right).

"This strong support from our customers speaks volumes about our progress on the American Centrifuge Plant," said John K. Welch, USEC president and chief executive officer. "Clearly, the American Centrifuge Plant will be an important component of the nation's energy security, and the thousands of new jobs we are creating can provide an impetus to America's economic recovery."

In a prepared statement, Ichiro Takekuro, executive vice president and chief nuclear officer at Tokyo Electric Power Company, the largest operator of nuclear reactors in Japan, said,

"Globally, diversity of supply of enriched uranium is critical to ensuring the nuclear industry can provide customers with clean, safe energy for decades to come. The American Centrifuge Plant will help the nuclear field achieve that goal."

As a practical matter, utilities in the global hunt for nuclear fuel will seek to sign as many forward contracts as they can affford from multiple sources to avoid the financially catastrophic effects of having to shut down a nuclear reactor due to the lack of enriched uranium in the supply pipeline.

USEC's plant is slated to come online, as is Areva's in 2014, which gives you an idea of just how far ahead the utilities are thinking about the operation of their plants. With new nuclear plants being designed for 60-years of operation, guarantees for the fuel supply over the plant's life cycle are a crucial success factor for utilities.

Overall, USEC has sent up a pretty bright flare to get DOE's attention. It needs the loan guarantee to build the plant. There are credible doubts whether it can raise the $3.5 billion from private investors if it needs to do so without the government’s backing. The loan guarantee could be USEC’s “rescue swimmer” when it comes to making or breaking the project or at least in terms of size or timing based on USEC's current plans.  Without the loan guarantee, the plant could be smaller and built in stages.  

Then there are all those jobs in Ohio that USEC claims, 8000 in all, that will be generated by a full size plant built in this decade.  In the current financial downturn, USEC could be pitching its plant as "shovel ready" to an Obama administration anxious to deliver on a campaign promise made in writing last Fall to Ohio's swarms of Democrats.  There are few Democats, and none of Obama's campaign promises pending, in Idaho.

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Victoria, Texas, Two-Step

Exelon switches reactors but not vendors, for the twin unit project

A few months ago the nation’s biggest nuclear power utility dealt a devastating blow to the GE-Hitachi consortium that is developing the new Economic Simplified Boiling Water Reactor (ESBWR) a 1,550 MW unit. Because the design is still under review by the NRC, and not yet certified for market, the Department of Energy ranked it as a nonstarter when it comes to qualifying for federal loan guarantees. This led Exelon to bid goodbye to the ESBWR and bring the Victoria, Tex., project to a dead standstill.

This week the news looks like a Phoenix-bird rising from the ashes with Exelon choosing the older, but certified ABWR reactor, a 1,350 MW unit from GE-Hitachi, for the Victoria, Tex. site. According to World Nuclear News, Exelon now joins NRG at the South Texas Project (STP) in building ABWRs in Texas and bringing the total projected power profile for the ABWR reactor design in Texas to four units and 5.4 GWe.

The key reason for the switch is that four of the ABWRs have been built and are operating in Japan and one is under construction in Taiwan. This reality gives them a robust market profile. It provides assurance to Exelon that a revised application to the Department of Energy for federal loan guarantees will be back on the charts.

No one has even built an ESBWR. At the rate things are going, it may be a while before someone does. In addition to Exelon, Entergy, another giant U.S. nuclear utility, bid goodbye to the ESBWR for its River Bend and Grand Gulf sites and Dominion, a Virginia utility, also threw the doors open to reconsideration of its decision to build an ESBWR. Only Detroit Edison’s Fermi III is a near term candidate for the reactor.

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India raises 8 billion euros for new reactors

Deal includes two Areva EPRs and nuclear fuel for 60 years

India is moving into the front range of countries able to raise money to develop nuclear energy after thirty years of near hibernation. This week Nuclear Power of India announced it has commitments of 8 billion euros ($10 B) to build two Areva 1,650 MW EPR reactors. Significantly, 70% of the project is subscribed through debt by a 15-bank consortium that includes ten from France. Bloomberg Wire Service reports that the deal also includes nuclear fuel for the reactors for the next 60 years.

Chairman Shreyans Kumar Jain said in a telephone interview with Bloomberg, “Our expression was for 3 billion euros, but we have got commitments for 8 billion euros,” he said.

The project with Areva, to be built at Jaitapur in western India, will be India’s first large reactor. The company may increase the number of reactors to six to form its first “nuclear park, but that will take place after the first two are built and operational.

India plans to add 20,000 MW of nuclear capacity by 2030 from the current 4 MW mostly supplied by aging ACEL heavy water reactors.  The company plans to invest $1.2 billion to buy equity in overseas uranium mines and is reportedly seeking long-term supply contracts with Kazakhstan and Canada.  The initial objective is to buy 750 tons of uranium a year. 

In doing so it will go head-to-head with China and Japan which are also seeking to lock in their uranium supplies. The difference is, for India, that it still can't convince Australia to sell it uranium because the Labor government there has concerns India will use some of the uranium for its military reactors. 

Jain (left) told Bloomberg the reason India is aggressively seeking to lock in uranium supplies is that, “We want to insulate all future programs from any possibility of starvation on account of fuel. We want to maintain a big inventory so that any disruption won’t result in wastage of the huge investments we plan to make building nuclear capacity.”

Kazakhstan deal is on

The Indian government plans to sign a previously announced nuclear trade agreement with Kazakhstan, Jain said. The company signed an accord for uranium supplies, mining and fuel fabrication technologies with Kazakhstan’s KazAtomProm in January 2009.

Nuclear Power plans to buy 2,000 tons of uranium from Kazakhstan over the life of the contract. The company will commit to build a 220 megawatt or a 540 megawatt power project in Kazakhstan.  India does not have a reactor design that is competitive on the world market. One of India's options in this part of the deal is to sub-contract the build to the Russians who just inked a 4,400 MW deal with India last November.

See also prior coverage on this blog

• India enters the nuclear renaissance
  
• Nuclear suppliers group approves India's deal

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Nuclear power, yes please

From Sweden where people are realizing nuclear energy must be part of the energy mix

A forum for discussion of all things nuclear with a stunning button that I hope you will share with others.

Nuclear Power – Yes Please

Access is free but registration is required. Don’t forget once you’ve registered to add your voice to the forums.

I am calling on all who support nuclear energy to put this button on their website, blog, discussion forum, or other online resource. It is time for a show of support across the Internet as a way to push back against some of the frankly unbelievable claims of anti-nuclear groups.

It's defintely the kind of thing we need as a graphic to spread around.

BTW: At the web site noted above you can get this button in different languages.

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UAE seeks nuclear trade deal with US

A nation swimming in fossil fuels and sunshine puts a priority on a nuclear energy

~ Exclusive to the Energy Collective ~

A special report on the arrival of nuclear energy at the United Arab Emirates. Posted at the Energy Collective.

Access is free. Click here. If you have any problems with the link, you can read the PDF version but the links in it will not be live.

Note that first time registration with a self-selected user ID and valid email address may be required for access which is free.

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No time for winner-takes-all

Future of loan guarantees for Areva's Eagle Rock project

Readers of this blog are no strangers to the issues, and news media coverage, surrounding loan guarantees for Areva's planned Eagle Rock uranium enrichment plant. The Idaho Falls Post Register ran a lead editorial on Sunday March 22, 2009, on the subject.

Normally, the newspaper's editorials, like all of its content, are behind a firewall accessible only to paid subscribers. However, in the interest of sharing the newspaper's views with the readers of this blog, Roger Plothow, publisher of the Post Register, has granted permission to publish the entire editorial here online as it appeared in the newspaper today. The editorial was written by Post Register Editorial Page Editor Marty Trillhaase.

No time for winner-takes-all

There are several idiotic debates under way at the moment -- but pitting a uranium-processing plant in Idaho Falls against another proposed in Ohio has to top the list.

Watching the jockeying for $2 billion in federal loan guarantees makes for intriguing political theater. But it's silly. The nation really needs both.

The United States Enrichment Corp. wants the guarantee to shore up its American Centrifuge Plant in Piketon, Ohio. On its side are domestic roots -- the USEC once was part of the federal government -- a campaign pledge of support from President Barack Obama, a Democratic governor and the state's pivotal 20 Electoral College votes. The USEC's financials are shaky and the plant is on hold pending the loan guarantees.

Areva also wants the $2 billion loan guarantee for its proposed Eagle Rock plant outside Idaho Falls. But the company isn't holding many good political cards. It's foreign-owned (French). Idaho's a small, Republican state on the outside looking in on the Democratic Obama administration.

Right now, half of the uranium powering this country's 104 commercial nuclear reactors comes from Russia. The USEC has a contract to process weapons-grade fuel from Russia's dismantled nuclear bombs and turn it into fuel.

"The United States is dependent on Russia for a significant portion of its nuclear energy. I don't think a lot of Americans know that," said Robert E. Ebel, a nuclear analyst at the Center for Strategic and International Studies.

If relying on a sometimes-hostile Russia for our nuclear fuel doesn't make you nervous, maybe the fact that this contract expires in four years will.

Meanwhile, the supply of enriched uranium is getting tighter. Since 1996, the world has built another 40 reactors. The nuclear renaissance may see another 30 reactors built in this country.

Enriched uranium is measured in terms of separative work units. Today, the U.S. needs about 12.7 million SWUs.

Build the USEC's plant and you'll get 3.8 million.

Urenco, a joint Dutch, German and British concern, is proceeding with its Louisiana Energy Systems plant in Eunice, N.M. It will provide 3 million SWUs of enriched uranium.

And Areva also will generate about 3 million SWUs.

Having three companies involved denies any one of them a chokehold on domestic fuel supply. It also provides a geographically dispersed network.

Still, that leaves the U.S. dependent on foreign sources for about 25 percent of its enriched uranium -- not counting increased demand that would follow new reactors coming online.

This is no time for winner-takes-all politics. If Congress expands the loan-guarantee program, it does not mean more federal spending. It merely allows these companies to get financing more easily and cheaply.

Or would you prefer relying on other countries for this kind of energy, too?

Marty Trillhaase

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Reactor new build roundup for 03/22/09

Comanche Peak and Nine Mile mark milestones in progress towards NRC license and breaking ground

The planned expansion of the Comanche Peak nuclear power plant in Glen Rose, TX, could get an NRC license by 2011 based on a schedule published by the regulatory agency this month. The project’s reactor design, a Mitsubishi PWR rated at 1700 MWe, is also on track for design certification by 2012. It was submitted for review in December 2007.

Luminant, which is a business unit of Dallas-based Energy Future Holdings, is seeking to build two of the giant reactors in Texas, and, like most things in the Lone Star State, they are slated to be the largest reactors of their kind anywhere in the world. However, they are not first-of-a-kind designs as 23 smaller versions have been built in Japan.

Not everyone in Texas is thrilled with the plans to build the two new units. A group calling itself the Sustainable Energy & Economic Coalition, based in Austin, plans a broad attack on the license application. It plans to raise issues involving water use, security, evacuation plans, storage of spent nuclear fuel, and health issues. Karen Hadden, the group’s leader, told the Ft. Worth Star Telegram her group will partner with one with similar objectives, to kill the project, based on Ft. Worth called ‘True Cost of Nukes.’

Another green group, called ‘Nuke Free Texas’ appears to be attacking anything that moves with the label ‘nuclear’ on it. This includes, in addition to the Luminant project, the expansion of the South Texas Project and Exelon’s efforts to develop a reactor at Victoria, TX. Singer Bonnie Raitt is holding concerts to raise money for the groups.

In response to the opposition, Brett Wiggs, vice president of Comanche Peak Nuclear Power, said: "Luminant and Mitsubishi are committed to advancing this application for safe, dependable clean-air energy together. This new review schedule shows the application continues to make significant progress."

Luminant also said it has been notified by the Energy Department that the expansion has significant merit and is still under consideration for a loan guarantee.

Unistar plans third unit for Nine Mile Point

The next generation of nuclear reactor technology, a 1600 MW Areva EPR designed and tooled for the American market, will be built in Oswego, NY, according to George Vanderheyden, CEO of Unistar Nuclear Energy.

What generated the local concern is that in February Constellation Energy / Unistar asked the NRC to delay license review of the planned 1,600 MW Areva EPR for the Nine Mile plant in New York. UniStar said it wants to focus attention on UniStar's planned reactor at the Calvert Cliffs plant in Maryland. Earlier, UniStar dropped Nine Mile out of the competition for federal loan guarantees for nuclear power, also to concentrate on the Calvert Cliffs proposal.

This week Vanderheyden told a meeting of business executives in Oswego this week that the firm is committed to the project known as Nine Mile Point Unit #3. Unistar submitted a license application to the NRC for the project in September 2008.

“There was a rumor going around that we were slowing down, or delaying the project or weren't as committed to the Nine Mile Point 3 project, so I thought it was important to come up here, and not so much set the records straight as tell you what we are doing,” he said. “This is truly a very, very important project for my company, the second in a fleet of nuclear facilities built across the country with the potential for tremendous economic benefits for surrounding communities.”

Vanderheyden also rejected rumors that have been circulating concerning the need for transmission lines if Nine Mile Point 3 were to be built. “Contrary to popular belief, we do not need new transmission lines. We'll have to do some minor improvements, but no new transmission lines are required,” he said.

He remarked that public support was one of the key reasons Nine Mile Point is an ideal location for a new facility, along with access to water and existing infrastructure.

“We will not build one of these facilities where we're not wanted because it's just too hard,” Vanderheyden said. “The reason I'm here is because overwhelmingly, Oswego has supported the idea of building a new nuclear facility.”

Nine Mile Point consists of two nuclear reactors operated by Constellation Energy. UniStar is a new build joint venture; one of the owners is Constellation, and two other companies, Bechtel and Areva, that are partners in new build.

The proposed plant would generate and additional 1,600 MW. It would have a smaller cooling tower, just 170 feet tall compared to the towers for the older units which are 500 feet high. It will use 50% less water.

Vanderheyden said renewable energy will benefit from the growth of nuclear energy which will provide a stable power base for variable solar and wind power.

Oswego gets a lot of lake effect snow so reliable nuclear power is a must for the economic well-being of the region.

Ameren legislation picks up support

The St. Louis Business Journal reports that a broad coalition of business organziations has endorsed legislation now pending in Missouri that would allow a new nuclear reactor to recover construction costs while the reactor is being built.  Ameren (NYSE:AEE) is proposing to build a 1600 MW Areva EPR at Callaway, MO.

The coalition, Forward Metro St. Louis, is comprised of the Regional Chamber and Growth Association, Civic Progress, The Regional Business Council, Partners for Progress and the Leadership Council Southwestern Illinois.

Missourians for a Balanced Energy Future, a group that has worked to drum up support for the legislation, has publicized the position taken by Forward Metro St. Louis.

In the legisalture the Journal reports Senate Bill 228 awaits a vote in the Senate Commerce Committee after lawmakers return from spring break. A similar House Bill 554 has cleared the House Utilities Committee and awaits action in the full House.

NRC estimates strong growth of nuclear energy

Dale Klein, chairman of the U.S. Nuclear Regulatory Commission (NRC), told the Senate Energy & Natural Resources Committee this past week the agency has received 17 applications for 26 new nuclear reactors and could get applications for five-to-seven more by the end of 2009. Reuters reports Klein told the committee the first new reactors are likely to be in revenue service by 2016.

In related testimony before the committee, the Nuclear Energy Institute said it expects four-to-eight reactors to be operational by 2016 at a cost of $6-8 billion each. NEI also said the current ceiling for loan guarantees for new nuclear power plants is inadequate and it called for a separate agency, outside of the Department of Energy, to administer the program.

Both the NRC and NEI told the committee the Obama administration’s announcement to stop work on Yucca Mountain does not mean the end of the nuclear industry in the U.S. Both organizations said spent fuel can be safely stored in dry casks at reactors for up to 150 years.

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