UPDATE:US Energy Secretary Chu: Loan-Guarantee Program To Be Sped Up

U.S. Energy Secretary Steven Chu said Friday that the Obama administration hopes to issue nuclear loan guarantees "soon" as part of a broader plan to speed up loan guarantees, but that the government is running into problems finalizing the subsidies.

"We're going to be accelerating our loan-guarantee process even more," Chu told reporters in a briefing to discuss the administration's priorities for 2010. Chu said that nuclear loan guarantees would come "soon," but that getting them finalized was "more complicated than I thought."

Constellation Energy Group Inc. (CEG), NRG Energy Inc. (NRG), Scana Corp. (SCG) and Southern Co. (SO) are expected to receive the first guarantees for nuclear projects. Government support is viewed as essential because of high costs, lengthy timetables and a history of cost overruns in the construction of nuclear reactors.

The U.S. Energy Department last year took a step toward speeding up funding by changing some rules. Among the changes was a decision to eliminate the requirement that the U.S. government be first in line for claims if a nuclear power project guaranteed by the U.S. government defaults. The DOE also said that under the rule changes, it would be able to consider teaming up with overseas financiers known as export credit agencies. That would help UniStar Nuclear Energy, which is backed by Constellation, because French export agencies could try to guarantee projects with components from the country.

The Obama administration has been talking up nuclear energy at a time when Republicans, who tend to favor nuclear power, will be essential to passing climate legislation. But the White House has also indicated that it favors taking a new approach to the handling of nuclear waste, abandoning long-running government plans to store the waste at a central repository at Yucca Mountain. That has complicated its message.

"Yucca Mountain is off the table," Chu said, affirming a policy that the Obama administration announced last year. Chu has announced plans to form blue-ribbon panel to study a new approach. On Friday, Chu said that the panel would not be charged with coming up with a new central repository.

The loan-guarantee program that started in 2005 under the Bush administration finalized its first subsidy last year.

Asked if companies should still have to pay the government fees for waste disposal even though the U.S. government has not met its obligations to haul off the waste, Chu played down the costs to companies, saying that "waste disposal is a small fraction of" the costs of nuclear power.

-By Siobhan Hughes, Dow Jones Newswires; 202-862-6654; siobhan.hughes@dowjones.com

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