TEPCO Takes Stake in STP Expansion as NINA Seeks Japanese Financing

Barely three months after Nuclear Innovation North America (NINA) and CPS Energy negotiated a $1 billion settlement that reduced the San Antonio municipal utility’s share in the proposed nuclear expansion of the South Texas Project (STP), Japan’s Tokyo Electric Power Co. (TEPCO) said on Monday it would take a 9.24% stake in the Bay City project.

TEPCO said it would invest $155 million in the project mostly owned by NINA—the nuclear development company jointly owned by NRG Energy and Toshiba Corp.—“once a conditional commitment for U.S. Department of Energy loan guarantee is secured for the project.” The $155 million includes a $30 million option payment to NINA, enabling TEPCO to buy an additional 10% share of the company for an additional $125 million within approximately one year.

The settlement reached on Feb. 17 between CPS Energy and NINA reduced CPS Energy’s stake in STP Units 3 and 4 to 7.625%, while allowing NINA to increase its stake to 92.375%. It also allowed NINA to assume full management of the project. If approved by both boards, TEPCO’s share will now reduce NINA’s share to 83.1375%.

The dispute between CPS Energy and its 50-50 partner in the STP expansion, NINA, began last fall, when Toshiba gave CPS Energy a substantially higher preliminary cost estimate to build the two new units at the STP plant—reportedly $4 billion more than CPS Energy’s preliminary total project cost of $13 billion.

The disagreement escalated after NRG Energy (which holds an 88% stake in NINA while Toshiba holds the remainder) sued CPS Energy, claiming the utility should forfeit its $300 million investment and lose all value in the project. CPS then countersued the New Jersey energy company for $32 billion, claiming NRG, NINA, and Toshiba failed to disclose critical cost information and disparaged CPS to hurt the utility’s ability to sell part of its stake in the nuclear project.

But even before CPS filed its claims against NINA, a rumor held that NRG wanted CPS to withdraw from the project so that it could develop it instead with Japanese companies Toshiba and possibly Japan Steel Works, San Antonio Current reported in January. The newspaper said: “By bringing in such prominent Japanese companies as full partners in the STP project, the theory goes, NRG would be able to draw on the comparatively strong Yen and receive a degree of additional insurance from the federal Bank of Japan.”

NINA admitted in a statement on Monday that it was looking to diversify financing by “actively pursuing additional loan guarantees through the Japanese export credit agencies.” If approved, the company said that U.S. loan guarantees “cover an amount roughly equal to the investment in U.S. labor and U.S.-sourced equipment and commodities, while the Japanese loan guarantees would cover the Japanese investment in advanced nuclear expertise and equipment not available in the U.S.”

The settlement between CPS Energy and NINA was reached the day after President Barack Obama offered to conditionally guarantee $8.33 billion in loans for Southern Co.’s project to build two new reactors at Plant Vogtle in Georgia—the first, long-awaited nuclear loan guarantee. The STP expansion project, which entails building two Toshiba-supplied advanced boiling water reactors (ABWRs)—continues to be one of two projects shortlisted for DOE loan guarantees. The other contender is reportedly UniStar’s Calvert Cliffs plant in Maryland.

NRG’s CEO David Crane on Monday said TEPCO’s experience and financial participation would strengthen NINA’s efforts to obtain federal loan support from the DOE. "TEPCO has brought two advanced technology nuclear units online, on time and on budget and literally wrote the book on training the workforce for Advanced Boiler Water Reactor technology," he said.

Crane recently told Reuters that NRG had addressed questions from the DOE about whether NRG had the size and skills necessary to build the new reactors. "The government has known for several weeks that Tokyo Electric was a likely investor," Crane reportedly said. "With today’s confirmation, I don’t know what else we can do. We think we have cleared all the hurdles."

TEPCO, Asia’s largest utility and one of the world’s largest operators of nuclear power plants, has been a consultant on the South Texas expansion since the project began in 2006. Its stake in the project will mark the first time a Japanese utility has invested in an overseas nuclear power project. “We decided to participate in this project to secure a long-term stable source of profits, to grow with a new business opportunity and to globally contribute to cutting CO2 emissions,” the company said in a statement.

A combined construction and operating license for the new STP units from the Nuclear Regulatory Commission is expected in 2012. Unit 3 is now anticipated to come online in 2016, and Unit 4 in 2017.

Sources: POWERnews, STP, NINA, TEPCO, Reuters, San Antonio Current