Saturday, January 30, 2010

NRG Nuclear Plant Plans At Risk Over Dispute With CPS

NRG Energy, one of the four finalists selected by the U.S. Department of Energy to receive a share of $18.5 billion in loan guarantees, could terminate its plans to build a nuclear plant because of a dispute with San Antonio city-owned utility company CPS Energy. A dissolution of its current partnership with the city-owned utility could also threaten its loan guarantee if it decides to go forward with other partners.

A state-court has ruled that advised NRG and CPS Energy to resume negotiations surrounding CPS's desire to withdraw from efforts to build two nuclear reactors at a South Texas site, near Bay City. CPS has sued NRG, alleging unfair dealings and seeking $32 billion. The project is stumbling based on a a disagreement about projected costs and estimated expenditures to date for the project between the city-owned utility and the San Antonio elected officials. This project has the only proposal with a reactor design supplied and previously built elsewhere by its vendor.

NRG is disputing that CPS had invested hundreds of millions of dollars in the project without having received San Antonio city council approval. Support for the project faltered late last year when it became clear to elected officials that project costs could top $10 billion, apparently more than they understood from earlier estimates. The two sides are now trying to find a way to allow CPS to withdraw without jeopardizing a federal loan guarantee, without which the project wouldn't be economically viable. CPS Energy, the city utility is claiming it has invested $370 million in the project and believes it is entitled to far more in compensation. Negotiations have focused on finding a way to fairly compensate CPS, avoid more political fallout and find a way to substitute new investors so the project remains viable. NRG hopes to find a way to get CPS to surrender its interest to NRG so that it can bring in additional equity investors. Tokyo Electric Power Co. has expressed an interest in investing in the project.

The San Antonio city council was poised to approve a $400 million bond issuance in late October but held back when new numbers came to light that indicated the nuclear project could cost more than it expected. Like most municipal utilities, CPS has an appointed board that reports to elected city officials, whose approval is needed for rate changes or bond issuances. (WSJ, 1/30/10)

No comments: