UPDATE:New Nuclear Reactor Depends On Loan Guarantee -Constellation
March 29 2010 - 1:43PM
Dow Jones News
Constellation Energy Group (CEG) needs a government loan
guarantee and higher natural-gas prices before the company will
proceed with plans to build a new reactor at the Calvert Cliffs
nuclear power plant in Maryland, Constellation Chief Executive Mayo
Shattuck said Monday.
Plans for a third reactor at Calvert Cliffs are "highly
dependent on the loan guarantee program" and on tax credits for the
production of new nuclear power, according to Shattuck, who was
speaking at the company's analyst meeting in Baltimore.
Constellation plans to develop the reactor as part of UniStar
Nuclear Energy, a joint venture between Constellation and
Electricite de France (EDF.FR).
The proposed new reactor is a long-term bet on higher gas
prices, which set the price of the power that Calvert Cliffs 3
would generate, and on government regulations that would put a
price on carbon dioxide emissions, Shattuck said. Gas prices have
fallen about 32% since the beginning of the year as a surge of new
supply pressures the market.
"Those variables will factor in," he said. "They do have to
improve from where they are today."
Nuclear power produces almost none of the greenhouse gases that
are blamed for climate change.
Shattuck didn't provide a timeline for obtaining a conditional
loan guarantee. The Department of Energy selected Constellation as
a finalist for a loan guarantee last year. Under the loan-guarantee
program, the government promises to assume a company's debt
obligations if it defaults on debt incurred for the projects. The
guarantee is particularly important for Constellation because the
proposed third reactor is a "merchant" power project, which means
the company can't recover costs by charging ratepayers at
Constellation's regulated electric utility, Baltimore Gas &
Electric.
Constellation also expects financial support for the reactor
project from Coface, the French export credit agency. New nuclear
reactors in the U.S. are likely to cost $7 billion to $10 billion,
according to industry estimates.
-By Christine Buurma, Dow Jones Newswires; 212-416-2143;
christine.buurma@dowjones.com
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