Friday, February 12, 2010

1st DOE nuclear loan guarantee to Southern

Vogtle’s twin reactors are expected to enter revenue service starting in 2016

DOE logoDow Jones News Wires reports the Department of Energy will award the first conditional loan guarantee for a new nuclear power plant in the U.S. to Southern Co.'s (NYSE:SO) Vogtle plant in Georgia. The official announcement is expected early next week.

Also, there is speculation that DOE will soon make a decision on a loan guarantee for Areva’s Eagle Rock Enrichment Plant. Elected officials in Ohio, who support USEC’s enrichment plant, had a media meltdown on Feb 12 over this rumor which was denied by DOE spokesperson.

According to a newspaper in southern Ohio, DOE Spokeswoman Stephanie Mueller said. “It is not accurate. We have not made a decision yet on the loan guarantee.”

Two weeks ago Areva said through its Bethesda, MD, office that DOE’s “due diligence” for the project was complete and that document approving the loan guarantee on a conditional basis was waiting for a signature by Energy Secretary Steven Chu.

The federal government offices of DOE in Washington, DC, have been closed all week due to two major snowstorms. Next Monday Feb 15 is an official federal holiday which means it will be Tuesday, Feb 16 before the curtain will rise on the next act in this multi-billion dollar drama.

Southern is first of four expected actions

Southern logo Dow Jones noted that David Ratcliffe, Southern's CEO, has previously said that he expected the Vogtle plant to receive a preliminary guarantee before the end of the first quarter. Southern, along with Oglethorpe Power and the Municipal Electric Authority of Georgia, plan to build two new Westinghouse AP1000 1,150 MW nuclear reactors near Augusta, Ga.

The Vogtle project received an early site permit from the U.S. Nuclear Regulatory Commission last year. The permit allows the company to begin early stage construction at the site. Southern has filed for a combined operating license to build and operate the twin reactors, which could enter revenue service in 2016 and 2017. It has signed an EPC constract with Shaw to build the reactors.

Dow Jones noted the government won't award final loan guarantees for new nuclear power plants until the projects receive their NRC combined operating licenses, which are expected in 2011. As a practical matter, the utility doesn’t want to pay the premiums for the loan guarantee until they can draw funds from investors covered by the insurance.

Under the loan-guarantee program, the government promises to assume a company's debt obligations if it defaults on debt incurred for the projects. DOE has invested a lot of time, along with protracted dialog with OMB, over the calculation of the risk premium relative to due diligence for each project.

Loan guarantee program to expand?

Congress has authorized $18.5 billion for the nuclear loan guarantee program, enough for only two or three projects. The Obama administration has proposed tripling the program. As of May 2009, Southern, Scana Corp., Constellation Energy Group, and NRG Energy Inc. were the four companies with projects on the short list for the federal insurance.

NRG’s project has been beset with turmoil lately in disputes about costs between CPS Energy of San Antonio and Toshiba which will supply the reactors and build them. If NRG cancels its planned construction of two GE-Hitachia 1,350 MW ABWR reactors, Luminant at Comanche Peak, also in Texas, is the runner up site on DOE’s short list. There Luminant plans to build twin Mitsubishi 1,750 MW reactors to feed electricity into the Dallas/Ft. Worth region.

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1 comment:

Alain said...

Dan,

Thank you for the always insightful recap' of current events. The nuclear industry is moving so fast (technology, business, legislative considerations...).
Just this little comment to remind you that for STP, it's Toshiba's ABWR (slightly different from GE-Hitachi's version, originally certified in the US...).

Alain