HOUSTON (Reuters) - NRG Energy Inc said on Tuesday that regulatory uncertainty in the United States in the wake of Japan's Fukushima nuclear accident would force the company to abandon a plan for two additional reactors in Texas and to write off its investment in the project.
NRG will record a first-quarter 2011 pretax charge of about $481 million for the impairment of net assets of Nuclear Innovation North America (NINA), its nuclear development joint venture with partner Toshiba American Nuclear Energy Corp (TANE), an affiliate of Toshiba Corp.
Shortly after the March 11 earthquake and tsunami cut off power to the Fukushima station owned by Tokyo Electric Power Co, New Jersey-based NRG cut spending on the $10 billion Texas project and reduced its workforce, citing uncertainty related to a U.S. nuclear industry review and the already deteriorating economics for nuclear power in a low-priced natural gas environment.
"The extraordinary challenges facing U.S. nuclear development in the present circumstance and the very considerable financial resources expended by NRG on the project over the past five years make it impossible for us to justify to our shareholders any further financial participation in the development of the STP project," NRG Chief Executive Officer David Crane said in a statement.
NRG's decision indicates how difficult the Fukushima accident will make it for U.S. companies to participate in the global nuclear revival. The accident is expected to lead to regulatory changes that raise costs for existing reactors and for construction of new ones.
"It would take an unusual and unlikely degree of consensus from the public and private sector" to advance nuclear expansion, Crane said.
With Germany shutting its oldest reactors and prospects that other European countries may back away from nuclear power, the only new reactors will be built in developing nations, raising concern about nuclear safety, Crane said.
"A world in which the United States does not build new nuclear plants is a less safe world, in terms of nuclear safety," Crane said.
Toshiba will continue to fund work to obtain a license to build new reactors at the South Texas Project site in Matagorda County, 90 miles southwest of Houston, during the Nuclear Regulatory Commission's 90-day industry review.
Crane said it was unlikely, but not impossible, that the South Texas expansion could be revived in the future.
While NRG would support a prospective developer and would hope to remain an equity partner, the company will not invest further, Crane said. "There is no financial gas left in our tank," he said.
The first-quarter write down consists of $331 million of NINA's net assets funded by NRG along with $150 million of net investment contributed by the Toshiba affiliate.
Analysts had expected NRG to drop its ambitious nuclear plan as the Fukushima crisis raised questions about TEPCO's continued participation in the South Texas expansion.
NRG shares gained 39 cents before Tuesday's announcement, closing at $21.88 per share on the New York Stock Exchange. In after-hours trading, shares slipped to $21.66.