UPDATE 2-Japan TEPCO to take stake in Texas nuclear project

Mon May 10, 2010 4:47pm EDT

* Stake worth $125 million or about 12 billion yen

* Plans to invest 2.8 bln yen for option to get 10% more (Adds comment from NRG chief executive)

TOKYO May 10 (Reuters) - Tokyo Electric Power Co (9501.T) said on Monday it plans to take a stake of about 9.24 percent in a Texas nuclear plant expansion project for $125 million, or about 12 billion yen, the first such participation by a Japanese utility.

TEPCO, Asia's largest utility, said it also planned to invest about 2.8 billion yen in a year for an option that would give it the right to acquire an additional 10 percent stake for $125 million.

TEPCO said it sealed the deal with Nuclear Innovation North America LLC (NINA), a partnership between NRG Energy Inc (NRG.N) and Toshiba Corp (6502.T), to participate in the South Texas Project expansion to build No. 3 and No. 4 advanced boiling water reactors (ABWRs), each with output of around 1,350 megawatts.

The new reactors are expected to start operating in 2016 and 2017.

TEPCO has been a consultant on the South Texas expansion since 2007.

"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," TEPCO said in a statement.

At 2,700 megawatts, the South Texas Project is the largest of Texas' two nuclear plants. Together, the two power plants supply about 7 percent of the electricity used in Texas, or enough for more than 2 million homes.

David Crane, chief executive of NRG, the second largest electric generator in Texas, said TEPCO's experience and financial participation will strengthen the effort to obtain federal loan support from the U.S. Department of Energy needed to advance the project. [ID:nN10226149]

In talks with energy department officials, Crane said, questions have been raised about whether NRG has the size and skills necessary to build new reactors.

"The government has known for several weeks that Tokyo Electric was a likely investor," Crane said. "With today's confirmation, I don't know what else we can do. We think we have cleared all the hurdles."

TEPCO's involvement may also help the project secure additional financing support through Japan Bank for International Cooperation and Nippon Export and Investment Insurance, said Steve Winn, NINA chief executive.

The plant is managed by the STP Nuclear Operating Co and owned by Austin Energy, CPS Energy and NRG.

($1=91.56 Yen) (Reporting by Osamu Tsukimori and Chikako Mogi, with additional reporting by Eileen O'Grady; Editing by Michael Watson and Walter Bagley)

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