UPDATE:Southern CEO Sees 1Q Preliminary Nuclear Loan Guarantee

Southern Co. (SO) expects to receive a conditional loan guarantee from the Department of Energy within the first quarter to build two new reactors at the Vogtle nuclear power plant in Georgia, the company's chief executive said Wednesday.

A preliminary loan guarantee for the project is likely to be finalized "within the next couple of months," said David Ratcliffe, Southern's chairman, president and chief executive, in an interview.

Ratcliffe declined to disclose the amount of the conditional guarantee but said the company has made "significant progress" in negotiating the terms of the guarantee with the Department of Energy. The U.S. government hasn't yet issued any preliminary loan guarantees for new nuclear power plants.

The government aims to foster a buildout of new nuclear power plants with its loan guarantee program. Under the program, the government promises to assume the companies' debt obligations if they default on loans for the projects. Because new nuclear reactors are so costly, the loan guarantees are often a key step for energy companies that plan to undertake such projects.

The Vogtle project, estimated to cost $14.5 billion, received an early site permit from the U.S. Nuclear Regulatory Commission last year. The permit has allowed the company to begin construction at the Vogtle site.

Southern also filed for a combined operating license to build and operate the 1,100-megawatt reactors, which the company has said could enter service in 2016 and 2017. The government won't award final loan guarantees for new nuclear power plants until the projects have received combined operating licenses, which aren't likely to be granted before 2011.

Congress has so far appropriated $18.5 billion for the nuclear loan guarantee program, enough funding for only a handful of projects. As of May, Southern, Scana Corp. (SCG), Constellation Energy Group (CEG) and NRG Energy Inc. (NRG) were the four companies with projects still in the running for federal loan backing.

Southern shares were down 0.5% to $32.81 in recent premarket action.

-By Christine Buurma, Dow Jones Newswires; 212-416-2143; christine.buurma@dowjones.com

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