TVA sour on nuclear lease deal

TVA sour
on nuclear
lease deal

■ Agency says it's still too
early to decide on Browns
Ferry restart.

BY DAVE FLESSNER
BUSINESS EDITOR

Tennessee Valley Authority
officials on Thursday dis-
missed an initial offer from de-
veloper Franklin L. Haney to
finance the
restart of the
utility's oldest
nuclear reactor.
But Mr.
Haney immedi-
ately proposed an alternative
which he said
would go even
further in help-
ing TVA cut its
debt costs and increase its
power generation.

TVA Vice President Jack
Bailey said Mr. Haney's latest
proposal may be considered
along with other financing op-
tions, but not until next year
at the earliest.

not going to make a decision on
financing one of our nuclear
plants until the board makes a
decision whether we want to
restart the plant," Mr. Bailey said
after meeting with Mr. Haney
and his representatives Thurs-
day. "That decision won't be
made until early next year, and
when we get to the financing is-
sue, we will certainly look at all
the options and solicit proposals
from many sources."

TVA is preparing an envi-
ronmental assessment and cost
estimate to restart its Unit I re-
actor at the Browns Ferry Nu-
clear Plant near Athens, Ala. The
reactor, which began generating
electricity in 1977, was shut down
in 1985 because it failed to meet
new federal safety standards.

TVA estimates it will cost from
$1.2 billion to $1.5 billion to re-
pair, but the final environmental
and cost estimates are not ex-
pected until next year.

Mr. Haney has offered to pay
up to $1.6 billion to restart the
Browns Ferry reactor through
an investor group called Nuclear
Leasing. The Chattanooga fi-
nancier is trying to take advan-
tage of near-record low interest
rates, including a source of long-
term financing he says is cheap-
er than what TVA may obtain.

Mr. Haney also submitted an
offer to TVA on Thursday to fi-
nance the completion of the Belle-
fonte Nuclear Plant in Hollywood,
Ala., under a similar leasing plan.

"The markets are as favorable
as they are likely to get in years
for long-term financing and we
understand that there is equip-
ment and technologies in these
nuclear plants which will be-
come obsolete if they are not
used in the next couple of years,"
said Joe Conner, a Chattanooga
attorney who represents Mr.
Haney. "We understand TVA's
desire to carefully consider their
power needs, and we want our
proposal to be competitively bid
with any others that may be out
there. But there is a real oppor-
tunity for TVA to move ahead
now and save a lot of money."

TVA Chairman Glenn Mc-
Cullough, however, said last
month he will not be rushed in-
to any decision about Browns
Ferry or Bellefonte.

"We will be very deliberate
and make a good business deci-
sion in the fullness of time," Mr.
McCullough said. "It won't be
driven by bond rates. It will be
driven by a comprehensive study
of the facts."

Some environmental leaders
opposed to activating any more
nuclear plants are wary of Mr.
Haney's offer.

"It's a shell game that still requires
TVA to pay for cost overruns and de-
lays," said Stephen Smith, executive
director of the Southern Alliance
for Clean Energy.

Under Mr. Haney's leaseback
proposal, TVA is not expected to
incur any costs during the five-
year repair of the plant. The agency
would then make payments from
the income derived by the reactor
into an escrow account for up to
25 years under the plan.

The plan involves a 33-year
lease which Mr. Bailey said is
longer than the life of the plant
and doesn't provide enough buy-
out options for TVA.

"The life of the lease and the
associated financing should be
no longer than the expected life
of the asset and in our opinion
this violates that standard," Mr.
Bailey said.

Mr. Conner said Mr. Haney
has offered different lease op-
tions that fully conform with
TVA standards. "We appreciate
TVA taking the time to review
our proposal, but we were dis-
appointed that they didn't ap-
pear to understand all of our
plan," he said.

TVA's internal review of Mr.
Haney's original offer also con-
cluded that TVA could borrow
money at a lower rate than Mr.
Haney. But with $26 billion of
debt already and billions of dol-
lars of potential capital costs for
pollution control, maintenance
and transmission improvements,
TVA may not be able to finance
more power plants and still meet
its goal of paying down its debt.

Mr. Haney also claims to have
a new source of long-term cap-
ital for much less than his initial
Aug. 6 offer. Mr. Conner said the
new funding source is available
for 0.17 percent less than what
TVA now pays for comparable
long-term debt.

"We think we have a win-win
for TVA and we're going to con-
tinue to work with TVA," Mr.
Conner said. "In our view, the
ball is still in play even if our ini-
tial offer isn't."

E-mail Dave Flessner at
dflessner@timesfreepress.com