Nuclear Loan Guarantees Should Be Doubled -US Energy Secretary
September 25 2009 - 12:04PM
Dow Jones News
Federal loan guarantees for new nuclear power plant construction
should be at least doubled to allow construction of four to five
additional plants, U.S. Energy Secretary Steven Chu said late
Thursday.
If Congress were to approve this, companies such as Duke Energy
Corp. (DUK) and Progress Energy Inc. (PGN) could be among the
beneficiaries of the new loan guarantees.
Chu, in an interview with Dow Jones Newswires, said additional
nuclear power plant loan guarantees would help rejuvenate a
domestic industry and cut greenhouse gas emissions.
Although companies have submitted 18 new nuclear power plant
license applications to the Nuclear Regulatory Commission, the
Department of Energy only has authority for $18.5 billion, enough
for four to five plants.
"If you really want to restart the American nuclear energy
industry in a serious way...we [need to] send signals to the
industry that the U.S. is serious about investing in nuclear power
plants," Chu said on the sidelines of a conference here.
Chu didn't say when he would formally propose such an
expansion.
Republicans have urged construction of 100 new nuclear power
plants. While not going that far, Chu said "there's real interest
out there [for] another four to five or more, we could easily
do."
"It's part of how we're going to get to the carbon reductions we
need in order to avoid the worst of climate change," Chu said.
Earlier this year, the DOE narrowed the list of proposed new
nuclear power plants it's considering for the limited loan
guarantees, pointing to the ones farthest along in the license
application process.
New reactors at Southern Co.'s (SO) Vogtle plant in Georgia,
SCANA Corp.'s (SCG) Summer plant in South Carolina, Constellation
Energy Group Inc.'s (CEG) Calvert Cliffs plant in Maryland and NRG
Energy Inc.'s (NRG) South Texas plant are among the projects still
in the running for federal loan backing. Constellation is
developing the Calvert Cliffs reactors as part of UniStar Nuclear
Energy, a joint venture between Constellation and Electricite de
France SA (EDF.FR).
"We definitely welcome it unconditionally," said Mitchell
Singer, a spokesman for the Nuclear Energy Institute. "We've said
for a long time now the loan guarantee program is remarkably
unfunded."
Under the loan guarantee program, the government promises to
assume the companies' debt obligations if they default on loans for
the nuclear projects. Given rising construction costs exacerbated
by a growing supply crunch for qualified engineers and specialized
nuclear power plant parts, industry officials say new projects are
unlikely to be able to move forward without government
assistance.
Pressing for new nuclear power may help the administration win
over a handful of Republican Senators needed to help pass a
landmark climate bill into law. Sen. John McCain, R-Ariz., for
example, supports a cap on emissions in principle, but said
government support for nuclear power is essential for him to
consider backing a bill that would cut greenhouse gases.
The Energy Secretary said the loan guarantees would help
revitalize a U.S.-based nuclear industry, given that most of the
major companies that build reactors are now owned by international
companies.
"It's also an American leadership issue," the Secretary said.
"We were the pioneers in the nuclear industry...We are no longer
the world leaders," he said.
Several companies, such as Exelon Corp. (EXC), have suspended
their reactor license applications, citing difficult market
conditions, including the dearth of loan guarantees and unresolved
long-term waste liabilities.
New nuclear power plants are estimated to cost $5 billion to $8
billion to build. With such high upfront capital expenditures
compared to the firms' market capitalization, financing is
extremely difficult.
Marshall Murphy, Exelon's director of nuclear communications,
said additional loan guarantees would be encouraging. "It would
certainly make...it one factor that would be trending
positively."
Other companies that have applied include a joint venture
between TXU Corp. (TXU) and Energy Futures Holdings Corp., Dominion
Resources Inc. (D) and PPL Corp. (PPL).
Earlier this week, Chairman of the Nuclear Regulatory Commission
Gregory Jaczko said on the sidelines of a Platts Energy briefing
that the agency was revising its license application schedule.
Several applications would likely be delayed because more technical
work from the companies was required, he said. Jaczko declined to
elaborate.
-By Ian Talley, Dow Jones Newswires; (202) 862 9285;
ian.talley@dowjones.com
(Christine Buurma in New York contributed to this article)