Loan Guarantees? What Stinkin’ Loan Guarantees

By Kennedy Maize

Washington, D.C., July 29, 2010 — More hurdles have arisen for the nascent nuclear renaissance. It now appears that federal loan guarantees for new nukes could turn out to be a dead end, meaning that only two utilities, at most, will get Department of Energy support for new reactors.

In passing the supplemental war appropriations bill this week, Congress dropped plans for an additional $9 billion in loan guarantees for nukes (and another $9 billion for renewable energy). In the meantime, it isn’t clear whether Congress will approve the Obama administration’s request in the regular FY 2011 budget request for an additional $35 billion in loan guarantees. The House energy and water appropriations subcommittee approved $25 billion for nuclear loan guarantees earlier in July, but it isn’t clear whether the full committee will buy off on that figure.

That leaves the Southern Co. with the only approved DOE loan guarantee in hand, a conditional $8.3 billion. Ironically, a Southern executive told the Electric Power trade show in Baltimore last May, at a point where the DOE guarantee was still pending, that his Atlanta-based utility holding company was prepared to go ahead with a two-unit expansion of its Vogtle nuclear station regardless of the DOE guarantee.

Golly, maybe DOE ought to take back the guarantee, since Southern Co. says it doesn’t need to support but can self-finance?

With a tad over $10 billion left in the loan guarantee kitty established in the feckless 2005 Energy Policy Act, three projects are competing for what is likely to be only one more award: Baltimore-based Constellation Energy, working with Electricite de France, for an expansion at Calvert Cliffs; NRG Energy, looking to expand at the South Texas Project; and South Carolina’s SCANA Corp., seeking to add to its V.C. Summer plant.

In what appears to be a hardball move, Constellation CEO Mayo Shattuck said yesterday that the Calvert Cliffs project is in jeopardy if DOE doesn’t soon approve a loan guarantee. To conserve cash, Constellation has cut back hiring contractors and vendors and is leaving vacant positions open, Shattuck said in a conference call. “We can’t keep going at the rate we are going without clarity on the loan guarantee,” Shattuck said. “Time is a little bit of our enemy at this point.” In all, Constellation and EDF have cut back spending by about a third

But time doesn’t seem to concern DOE. An agency spokeswoman told Bloomberg today, “We need to make sure we review all of these projects very carefully and very thoroughly,” suggesting, the report said, that DOE may make a decision of one of three pending finalists “by the end of this year.” DOE says it has more than 120 people working on the loan guarantee applications.

NRG in February said it expected a decision on its project by June. Shattuck said in the conference call yesterday, “I think we’ve all been geared toward having a decision before this point in time, frankly. There is some level of frustration that we haven’t had an answer at this point.”