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Financing New Nukes

Federal loan guarantees raise hopes for new reactors planned by affiliates of Constellation and NRG.

Fortnightly Magazine - February 2008

have their project-development pedals pushed firmly to the floor.

But with the 2008 loan guarantee funding now approved, exactly where do these two “first movers” stand? While each still claims they’ve made no firm commitment to going forward, both are spending millions to be ready to begin construction in 2010 and begin delivering electricity to the grid by 2015.

Each has established partnerships to share the financial risks and help speed the project along. Though Constellation/UniStar filed a partial COLA for Calvert Cliffs in July 2007 (to ensure it qualified for the production tax credit), NRG Energy was the first to file a complete COLA and have it docketed (reviewed and accepted as complete) by the NRC in November.

Designed to accommodate four units, NRG’s STP plant currently consists of two reactors that went online in August 1988 and June 1989, supplying roughly 2,700 MW of power to load centers in southern Texas. The twin units are owned by NRG Energy (44 percent), CPS Energy of San Antonio (40 percent) and Austin Energy (16 percent).

NRG plans to add two new units based on the NRC-certified U.S. Advanced Boiling Water Reactor (ABWR) developed by General Electric, Hitachi Ltd. and Toshiba Corp.

Though the COL application/docketing is a significant milestone—it took more than a year to complete the application, which consists of some 20,000 pages—the real work has only just begun.

“The COL process, including the time we spent on the application, may take three-and-a-half to four years,” Winn says. “We hope to be especially responsive during the review and shorten that process. At the same time, we need to complete our engineering and site preparation so we’re at the starting line, ready to go, when we receive our license. Our plan is to begin construction in mid-2010.”

While the COLA, federal loan guarantees, risk insurance and production tax credits certainly will reduce STP’s risk profile and enhance NRG’s ability to secure financing, Winn says NRG also is taking other measures.

For example, he says that choosing a proven technology, (the ABWR), and having Toshiba, which built the first ABWR, involved in its design, engineering and construction, is another form of risk mitigation. Kashiwazaki-Kariwa Unit 6, which Toshiba built for Tokyo Electric Power Co., took 39 months to build and began operations in 1996.

Locating the two units at an existing plant site pre-designed for future expansion is also a plus. “We want to create as much certainty as we can, because any delays will be borne by our shareholders,” he says. “There are site-specific benefits here, including an existing cooling pond designed to serve four units, which means we don’t have to build and maintain new cooling towers. The transmission system is already in place, and we have a major port nearby for equipment deliveries. So we see it as an easy site to build on.”

Though the ownership structure still hasn’t been finalized, NRG expects to own a 40 percent stake in the new units, with CPS taking another 40 percent, and the City of Austin taking the remaining 20 percent.