Blue Castle nuclear reactor project was being investigated by the Securities & Exchange Commission for alleged fraud. Second, The Tampa Bay Times reported that Progress Energy (NYSE:PGN) had cancelled its EPC contract with The Shaw Group throwing the future of the twin reactor project into serious doubt.
It turns out there is a lot more to the rest of the story in both cases. The good news is that despite the startling nature of the reports the facts did catch up with them.
Funny business in Utah?
On Jan 26 the Salt Lake City Tribune reported that a company providing financial backing to a planned nuclear plant is a fraud. The newspaper wrote that the Securities & Exchange Commission (SEC) says a hedge fund, supposedly into the nuclear project for $30 million, scammed its investors.
The firm, LeadDog Capital, of New York, had an agreement with Blue Castle to provide the funds at the front end of what could wind up being an $18 billion project. The SEC's complaint states the the principals of LeadDog Capital misrepresented the nature of the investments they made and that the firm concealed from new investors information on disputes it had with unhappy customers.
For its part Blue Castle issued a formal denial that it has any current ties to LeadDog and that it had plenty of money to back its project. Aaron Tilton, who heads Blue Castle, told the Salt Lake City Tribune "he never pulled the trigger" on the funding commitment from LeadDog.
As for the water rights, State Engineer Kent Jones said even if he had known about the problems with LeadDog, he would have signed off on the water rights anyway. He said he assumed that if one pocket was empty, that Blue Castle would have another that was full.
That said it isn't likely this controversy is wrapped up in a neat package. Anti-nuclear groups, including Utah HEAL and Uranium Watch, vowed to challenge the water rights decision based on the newspaper's report.
- Blue Castle Project for Green River - July 2008
Did Progress cancel its Levy County, Florida reactors?
The short answer is no, Progress Energy did not cancel its EPC contract for the reactors, but for a few days things were looking pretty dicey. On Jan 25 the Tampa Bay Times headlined that Progress Energy was looking to cancel the main construction contract to build two 1,100 MW Westinghouse AP1000 reactors. The news came out of nowhere and caught many people who follow the industry by complete surprise.
Perhaps the company was as surprised as anyone else and needed time to get its story straight? In any case, an anti-nuclear group called NC Warn issued its own press release along the lines of the famous refrain from the Wizard of Oz - "ding dong the witch is dead."
Worse, Progress is in the middle of protracted rate proceedings with the Florida Public Service Commission to obtain increases to pay for the construction of the two reactors as they are being built. Critics of the rate increases, and of the reactors, howled that Progress was trying to get money for a project it never planned to complete.
Two days later Progress formally denied that it plans to cancel construction of the reactors or its contract with The Shaw Group for the $20 billion project. A previously reticent Progress spokesperson now said the 2009 contract with The Shaw Group is still in place. The company also said that the revised estimate of costs of the project, and requests for rate adjustments, would take place in 2013 which is when the firm expects to get its combined construction and operating licenses for the two reactors from the NRC.
Progress is also in hot water in Florida over the estimated $2.5 billion in costs for repairs to the containment structure of its Crystal River reactor which will also be out of service until 2014. Some of these costs will be covered by insurance and some by a previous rate agreement that allows it to charge for the cost of replacement power. That's a lot of hot water for a reactor in cold shutdown.
Are you sure?
Progress has spent approximately $860 million on the Levy County project so far, mostly on engineering and licensing costs. Through the end of 2011 it has collected $545 million or just under two-thirds of what it spent. One of the elements of its agreement on rates related to covering the Crystal River repair costs is that the utility will throttle back on what it spends on the new reactors at Levy County at least through 2014.
J.R. Kelly said cancelling the EPC contract would not kill the reactors. In fact, he'd prefer to see Progress get its license, evaluate its costs, and then come back to the rate payers for funds, and not before. Progress has said it plans to complete the two reactors by 2021.
Separately, Progress and Duke Energy have pushed back the effective date of their planned mega-merger in order to sort out rate issues at both the state and federal government level. The flap over the status of the EPC contract offers one more fish to add to a fine kettle. Or and Hardy said famously to Laurel, "this is a another fine mess you've gotten us in."
The following statement was received from Progress Energy.
“Progress Energy Florida has not stated any intention to cancel the engineering, procurement and construction (EPC) contract for the Levy County nuclear project. The contract remains in effect and we continue to pursue the combined operating license (COL) with the Nuclear Regulatory Commission.
As the company has stated since April 2010, Progress Energy will reassess the Levy County nuclear project's timeline and cost once we receive the COL, expected in 2013.
We strongly believe state-of-the-art nuclear power is important to our state’s energy future. The project continues to be the best baseload generation option for Florida taking into account costs, potential carbon regulation, fossil fuel price volatility and the benefits of fuel diversification.”
- Concrete cracks up costs of restart - November 2011
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