Talks continue over Ga. nuclear plants

Talks continue over Ga. nuclear plants
by Ray Henry, Associated Press
10.14.13 - 12:00 am

ATLANTA — Three years after the U.S. government promised $8.3 billion in
lending for a nuclear plant in Georgia, Southern Co. and its partners have not
sealed a deal.

President Barack Obama's administration recently agreed to a fourth extension of
the deadline for finalizing lending agreements between Southern Co. subsidiary
Georgia Power and the other owners of the nuclear plant now under construction.
Congress authorized the funding in 2005 to revive a nuclear industry that at the
time expected growth.

Few utilities secured even a preliminary agreement, mostly because power
companies dropped plans to build nuclear plants. The Great Recession trimmed
the demand for energy, and plummeting natural gas prices made it cheaper to
build gas-fired plants. The slumping economy also pushed interest rates to
historic lows, reducing borrowing costs and undercutting the need for subsidized
lending.

Southern Co. is still pursuing the loans, though company officials say they are not
needed to finish the project. The company was able to privately borrow $4.3
billion last year at an average interest rate of less than 3 percent, Southern Co.
spokesman Tim Leljedal said in a statement.

"We are committed to financing options that will serve the best interests of our
customers, and — as long as the terms and conditions of DOE loan guarantees
serve those interests — we will continue to pursue that option," he said.

Negotiations to win federal financing for a proposed nuclear plant in Maryland
fell apart. SCANA Corp. and Santee Cooper applied for loan guarantees to build
a nuclear plant in South Carolina, but neither company views the funding as
essential.

"Can the company benefit from the program? In our view, yes," said Dimitri
Nikas, an analyst who studies regulated utilities for the Standard and Poor's credit
rating agency. "Is it absolutely critical? Probably not."

Originally, the loans seemed more important. The upfront building costs of a
nuclear plant are tremendously expensive. The two reactors under construction at
Plant Vogtle in eastern Georgia were originally estimated to cost $14 billion — an
amount that has been rising.

During the last round of building years ago, out-of-control construction costs

pushed some utilities to the brink of financial disaster. If a utility ran out of
money, it could be forced to stop building. A half-built nuclear plant cannot sell
electricity and raise cash. Lenders feared they would be repaid late or never at all.

Trying to ease doubts, the U.S. government promised it would reimburse lenders
if a utility was unable to repay its debts, shifting financial risk from creditors to
the taxpayers. When financiers face less risk, they lend money at cheaper rates.
That drives down borrowing costs for the utility and its customers.

The loan guarantees were more important for utilities that sell electricity in
competitive markets, said Richard Myers, a vice president who oversees policy
development at the Nuclear Energy Institute, an industry lobbying group. If a
nuclear plant cannot keep its costs competitive with much-cheaper natural gas
plants, it sells little power and its owners may have difficulty repaying debt. By
contrast, the utilities now building new nuclear plants serve monopoly markets
and have a legal right to charge customers for their costs. That reduces the risk
that creditors won't get repaid.

Myers criticized the government for seeking to charge credit subsidy fees for the
loans that were too high.

"We thought the methodology that the government was using was needlessly
conservative and pessimistic," he said.

In 2009, U.S. Department of Energy officials wanted to charge Georgia Power a
fee of between $17 million and $52 million to get the loans, according to
documents obtained by the Southern Alliance For Clean Energy under the federal
open records law. SACE is a critic of the loan program. DOE officials did not
return multiple messages seeking comment.

"That doesn't sound like a lot of skin in the game for a big company that has a lot
of reach," said Sara Barczak, who monitors the Plant Vogtle project for SACE.

Leljedal, the Southern Co. spokesman, said the power company has not received
a final proposal on the fees. Southern Co. CEO Tom Fanning said earlier this year
that there were disagreements over a range of issues besides the fees.