Thursday, April 26, 2012

Far west follies

AEHI, a penny stock firm, pursues development of a nuclear reactor in rural Idaho

Sustained attention by the U.S. Securities & Exchange Commission isn't the best advertisement to attract investors to buy a firm's stock.  Neither are multiple lawsuits by angry investors and land owners who want to stop a firm's project which is to build a nuclear reactor in rural Payette County, ID, 60 miles northwest of Boise.

Add in the resignation of the Chairman of the Board and what you have is the environment of recent developments that Alternative Energy Holdings Inc. (PINK:AEHI) finds itself in these days.

The only positive news in the ongoing drama is that AEHI agreed to pay off one group of angry investors with a $450,000 settlement.  A federal judge must approve the deal.

While AEHI denies any wrong doing, the charges are that AEHI CEO Don Gillispie and VP Jennifer Ransom lied about their compensation and manipulated the stock to enhance the firm's trading value.

Phillip Gordon, a Boise, ID, attorney, told the Associated Press that AEHI issued a string of deceptive press releases to promote demand for the stock while secretly unloading shares.  In their lawsuit, the investors say Gillispie and Ransom used the proceeds from the stock sales as their personal ATM blowing the money on expensive trips to Las Vegas and high-end sports cars.

Property owners seek to connect the dots

As AEHI settled that dispute a group of property owners in Payette County want to overturn local government actions that pave the way for AEHI to develop a green field site as a nuclear power station.  The lawsuit does not seek money damages.  It asks for an injunction against Payette County land use and permit decisions.

The lawsuit also alleges that as a result of Payette County's actions, AEHI was able to raise over $9 million in new investment which implicates local government officials in the ongoing fraud investigation by regulatory agencies.

AEHI said in a press statement April 18 that the multiple lawsuits are "preposterous," and claims they are an effort at legal maneuvering to consolidate separate cases and to revive cases the plaintiffs have lost in other venues.

Least likely to succeed?

The feasibility of AEHI's plans have long been called into question.  While it didn't promise investors the equivalent of a chicken in every pot, the extraordinary claims made by the firm don't stand up to scrutiny.

The concept of building a nuclear power plant in the area was abandoned in 2007 by MidAmerican Power, which is owned by Warren Buffet.  The Payette County location is the third site selected by AEHI after fracturing relations with two other Idaho counties over land use permit requests.

AEHI has referenced a South Korean reactor design which is years away from being certified by the NRC. The power grid in the region is incapable of taking the output from a 1400 MW nuclear reactor and wheeling it to customers.

AEHI has blown through three so-called investment banking firms none of which ever raised a dime for the company and the second firm itself was taken down by the State of Utah for fraud.  That firm took a $25,000 fee from AEHI.

AEHI quit plans to build on a site in Owyhee County for a variety of reason, but one that stands out is that it realized it would have to build a massive bridge over the Snake River to bring components to the site.  Elmore County, which was the second option, eventually offered AEHI a dry wasteland site near Mountain Home, ID.  Water rights disputes from down stream users likely would have been fatal to any location seeking to use water from the Snake River.

Can't be bothered

AEHI also tangled with environmental groups at one point filing a slap suit against the intemperate remarks of the director of the Snake River Alliance. The group still has harsh things to say about the project on its web site.

It calls AEHI a "cartoonish nemesis" and says it does not take its proposals seriously enough to devote time to opposing them.

That's probably the last word on the firm. If the local ant-nuclear group can't be bothered to stir up trouble for a nuclear reactor project, how viable can it be?

The advice of former NRC Chairman Dale Klein remains relevant.  Tagged as the "no bozos rule" by this blog, it calls out the elements of incredible proposals for new nuclear power plants.  If the glove fits . . .

At market close April 24, AEHI stock traded at $0.05 with a market cap of $16 million.

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Wednesday, April 25, 2012

Can TVA handle a third reactor this decade?

B&W wants to build an SMR at Clinch River

This is an updated report based on my coverage published in Fuel Cycle Week April 19, 2012, V11:N469, by International Nuclear Associates, Washington, DC

bellefontecolorfieldNote to readers On Thursday, April 26 the TVA board will meet (agenda) to review a report from the utility’s senior management on the new cost and schedule baseline for completion of Watts Bar 2.

In turn that project management plan will impact the schedule for the Bellefonte project. TVA’s board wants only one reactor under construction at a time. The utility must load fuel in Watts Bar 2 before it can commit to major construction activity for Bellefonte.

Update April 26: TVA board accepts new cost and schedule baseline for Watts Bar 2
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The development of a third nuclear reactor by 2020 at a TVA site, albeit a 180 MW SMR, is potentially headed for a squeeze play between two of its larger brethren. TVA’s board is already on record saying it wants just one reactor under construction at a time. The current construction project is the completion of Watts Bar 2, a 1,200 MW unit located in Spring City, Tenn., 55 miles northeast of Chattanooga. Once it is finished, TVA’s next project is completion of the 1,200 MW Bellefonte unit located just across the Tennessee border near Scottsboro, Ala.

The problem for the SMR developer, Babcock & Wilcox, is that its agreement with TVA to cost share the licensing and construction of a 180 MW SMR seems to stand independent of the board policy.It is unclear whether this project is affected by the TVA board policy or if it is so small that it flies under the radar. At $5,000/Kw, the $0.9 billion project isn’t “small” by most definitions of capital construction.

TVA’s board has good reason to be cautious about committing to more than it can handle in terms of nuclear reactor construction projects. On April 5 Mike Skaggs, TVA senior vice president for Nuclear Construction, said the emerging estimate to complete Watts Bar Unit 2 will require additional funding of $1.5 billion to $2 billion, putting the total estimated cost of completion in the range of $4 billion to $4.5 billion. The estimated time to complete is between September and December of 2015. That’s three years later than the original schedule released in 2007.

Skaggs, who started the construction review in October 2011, said corrective actions would address “the root cause findings and help deliver on the cost and time estimates.”

B&W joint venture

mowryWith that context in mind, FCW called Christofer M. Mowry, President of Babcock & Wilcox Modular Nuclear Energy, (right) to ask him about the company’s mPower[tm] SMR program and its aggressive schedule for deployment.

In an exclusive interview, Mowry told FCW B&W has a letter of intent signed in June 2011 for a cost sharing agreement with TVA to obtain Part 50 license from the NRC to build and operate a 180 MW small modular reactor at the utility’s Clinch River site.

The plan is to have a final configuration of two 180 MW units which would provide power to the Department of Energy’s Oak Ridge National Laboratory. Mowry declined to provide details how costs are split, but no matter how you cut it, the numbers aren’t trivial.

In response to FCW’s question about the one reactor at a time policy, Mowry said, “We have assurances from TVA they are committed to the project.”

Ray Golden, a spokesman for TVA, told FCW board policy doesn’t exactly address the issue of an SMR in the context of the two larger reactors. “Board policy would have to be explicitly changed to address it,” he said.

Time to market

time to marketTiming is everything, and according to a TVA white paper published this month, the Clinch River SMR wouldn’t be providing power to Oak Ridge until the mid-2020s. There is a lot riding on a faster time to market for mPower. As Mowry explains it, the firm has its eye on delivering the first unit around 2020.

To get there B&W will submit a proposal to the Department of Energy in response to its announcement of up to $452 million in cost shared funding for technical support and licensing reviews. The firm is competing with several other SMR developers for the money including Westinghouse which is developing a design of a 200 MW SMR.

Mowry told FCW he has not talked with Jim Ferland, formerly a senior executive at Westinghouse, who left the firm for B&W earlier this month. Ferland is now President & CEO at B&W.

One design, one review

In terms of the licensing pathway for the light water reactor, the firm has been submitting regulatory framework documents to the NRC in anticipation of submitting a full license application by 2Q 2014. B&W is pushing the idea of having one design, one review under 10 CFR Part 52.

eliot_brenner NRCEliot Brenner, a spokesman for the NRC, (right) told FCW in an email response to questions about B&W’s plan, that the agency likes the idea, but cautions the firm there are potential resource and schedule impacts of changes to the application are not managed properly.

“The NRC staff has discussed the importance of maintaining essentially identical technical information in both applications in order to take advantage of this strategy,” Brenner said.

“With specific conditions, the application of that philosophy between a 10 CFR Part 50 review (TVA Clinch River) and a 10 CFR Part 52 review (B&W mPower Design) is supported by the NRC staff in the letter to TVA dated January 31, 2011.”

Building the mPower reactor

While the regulatory process is moving ahead, Mowry notes that Bechtel Corp., B&W’s joint venture partner on the mPower reactor, will fulfill the role of EPC contractor to build it.

The reactor, originally scaled to come in at 120 MW, has been had its electrical power rating boosted to 180 MW. Asked about the increase Mowry said it is trade-off between the amount of power that can be generated by the reactor and still be able to manufacture it in a factory and deliver the components to a customer site by rail and truck.

supplychain[4]B&W has another advantage and that is ownership and control of much of the supply chain. The firm has manufacturing facilities in Lynchburg, VA; Barberton, OH, Euclid, OH, Mt. Vernon, IN, and, Cambridge, ONT.

The reactor has the advantage of having a four-year fuel cycle. All 69 fuel assemblies of conventional low enriched nuclear fuel are replaced at the same time. B&W will fabricate its own fuel. Mowry said the firm has finished the core design and expects to bring the reactor in at a cost “under $5,000/kilowatt. For a 180 MW unit, that comes out to less than $1 billion.

This price point is a key point of leverage for mPower. Mowry says B&W believes despite the current recession, power demand will return and natural gas prices will go up.

“The market for SMRs will explode after 2020,” he said.

First Energy tracks SMRs for development potential

What do you do if you have to close a bunch of coal plants and you already have two large nuclear reactors, but don’t want to build a new 1,000 MW unit? If you are FirstEnergy, with its corporate HQ in the nation’s tire center of Akron, Ohio, you start paying attention to the development of SMRs.

Jennifer Young, a spokesman for FirstEnergy, told FCW the firm is paying close attention to the development of the B&W mPower SMR. FirstEnergy Chief Nuclear Officer Jim Lash sits on an executive oversight committee for the project and other technical staff are part of a management team review that meets every six weeks. FirstEnergy is contributing to covering some of the costs of developing regulatory framework documents though Young declined to say how much or for how long the commitment would last.

FirstEnergy’s profile as a generator of electrical power in the Midwest is changing. Electrical demand went down 20% overall due to the recession. Although 12% has come back, due in part to the rebound of the rubber products industry, Young said the utility believes full recovery in the region long-term is not in the cards. Some manufacturing capacity, a prime source of demand for electricity, has gone to China or other places in Southeast Asia.

Another challenge is that new air emissions laws from EPA will force the utility to close nine smaller coal-fired plants that have been used for peaking demand.

Regardless of changes in its markets, the firm has not taken a first step toward acquiring an SMR from B&W.

“We have no plan at this time to commit to an SMR. Our efforts are a forward look a the technology as it is being developed. When the technology is ready we will be in a better position to evaluate it.”

TVA explores sale / leaseback of Watts Bar 2

The Tennessee Valley Authority has something in common with the ordinary rate payer like you and me. It has a credit limit. Unlike the average consumer, TVA’s credit limit is $30 billion and in the big leagues of finance, the firm is bumping up against its debt ceiling. With two reactors to build, and an SMR in the middle, it needs a way to make some of that debt go away, and pronto. Working it off with rate driven revenue over the next 30 years is not the best option.

What TVA wants to do, according the spokesman Ray Golden, is to sell the completed Watts Bar 2 unit to a group of investors and then lease it back. That action would drop an easy couple of billion off the debt load.

The benefit for investors is that a nuclear power plant run by one of the nation’s largest electric utilities is as close as they are going to come to a sure thing in terms of steady revenue.

The way the model works for Watts Bar 2 is that after fuel is loaded at Watts Bar, TVA sells or leases it to private investors. The investors get their funding from a combination of private investment and public debt. TVA makes lease payments on the plant and retains sufficient legal claims to the property to operate the plant and maintain its operating license.

TVA retains the option to buy back the plant in 20 or 30 years. TVA can use the new cash to fund at least half of Bellefonte’s $4.9 billion projected cost.

Tamar Cerafici, an attorney based in Pittsburgh, PA, who has worked as a consultant on financing SMRs, says the sale leaseback route is also attractive for smaller firms trying to bring one to market.

TVA’s Golden declined to speculate on whether the sale leaseback plan would be considered for the B&W mPower SMR or for Bellefonte. He did note that “we’re not breaking new ground here with this financial option. It is a widely used financial model.”

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Tuesday, April 24, 2012

San Onofre on comeback trail

Chief Nuclear Officer says plant will reopen

SanOnofre2Southern California Edison (SCE) has completed tube inspections on the San Onofre Nuclear Generating Station (SONGS) Unit 2. The plant staff is developing a plan to bring both reactors back online.

SCE informed the U.S. Nuclear Regulatory Commission (NRC) late last week that it has completed additional inspections of the 19,454 tubes. It has identified wear in two of the tubes in Unit 2 that is similar to the type of wear found in Unit 3.

Peter Dietrich, SCE’s Chief Nuclear Officer, said “We’re closing in on being able to state conclusively what we’ve learned.” In a press briefing held Monday April 23, he said, “We feel there’s a greater than 50% chance that one or both of the reactors will be back up by summer.”

He added a caution that the plants will not be brought back online until the NRC and the utility are satisfied it is safe to do so. The utility is responding to a confirmatory letter of March 27 that lays out the conditions that must be met to re-start the reactors.
Read the full details exclusively at CoolHandNuke online now.

coolhandnuke

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