Southern Co CEO says nuclear loan guarantee less enticing

NACOGDOCHES, TEXAS Wed Jul 18, 2012 11:01pm EDT

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NACOGDOCHES, TEXAS (Reuters) - Southern Co said on Wednesday it was willing to complete the first new U.S. nuclear reactors being built in three decades without federal loan support, as talks on an $8.3 billion loan guarantee drag on.

Southern Chief Executive Officer Tom Fanning said talks with the U.S. Energy Department were going slowly, and no resolution was in sight after new requirements were added to a conditional loan guarantee following the bankruptcy of solar panel maker Solyndra, which had received $500 million in loan guarantees.

"I've got to be convinced that whatever terms and conditions we enter into ultimately work to the benefit of our customers," Fanning told Reuters at the commissioning of a new biomass plant in East Texas. "If they don't, we don't need the loan guarantee."

Federal loan guarantees have been viewed as critical to encourage a revival of the U.S. nuclear industry as utilities seek to avoid a replay of ballooning costs that occurred when the last reactors were built in the 1980s.

With only a few projects going forward, Southern's two new $14 billion reactors at the Vogtle nuclear plant in Georgia will test the industry's ability to bring new units online and on budget.

Fanning also said lower-than-expected financing costs would help offset any rise in construction costs at the power company's two major construction projects -- Plant Vogtle and a $2.8 billion advanced-coal plant in Mississippi.

Southern has financed about $3 billion of its share of the new Vogtle units this year at costs well below the level anticipated when the project was certified by Georgia utility regulators, he said.

"We are way exceeding our ability to deliver the capital in a cost-efficient manner than anybody thought, and that's for both Vogtle and Kemper," Fanning said.

"Therefore, the operating costs that customers will pay for, I'm convinced, will be less than what they thought it would be when (regulators) approved it," he said.

MISSISSIPPI CHARGE

Fanning also said he hoped the Mississippi Supreme Court would act quickly on an appeal by Southern's Mississippi Power unit, which is seeking to charge its customers $55 million in early financing costs related to the Kemper County project, a 582-megawatt, integrated gasification combined-cycle (IGCC) coal plant under construction.

Late last month, the Mississippi Public Service Commission denied a rate increase linked to Kemper until a separate legal challenge to its certificate is settled.

In its appeal, Mississippi Power cited a state law that would allow the utility to charge half its requested rate increase if the state supreme court fails to act in 30 days of the filing and the full amount of the increase if the court does not act in six months, Fanning said.

"We are very hopeful that the Supreme Court will act and we won't have to rely" on the state law, Fanning said.

He said the dispute has had no impact on the pace of work at the Kemper project.

"We are going full bore to finish this plant by the scheduled date," Fanning said. "There is no slowdown."

He said Southern Power's 100-MW biomass plant in Texas was completed on time and within its roughly $500 million budget.

Electricity from the Nacogdoches facility is being sold to a municipal utility in Austin, Texas, under a 20-year contract at prices ranging from about 9 cents per kilowatt-hour rising to 13 cents.

Fanning said the biomass plant, which will burn non-commercial wood products and wood waste from East Texas and nearby Louisiana, was an example of the direction U.S. energy policy needed to take to reduce dependence on foreign energy.

(Reporting By Eileen O'Grady; Editing by Richard Pullin)

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Comments (2)
Paxus wrote:
So Fanning is clearly distorting reality here. Vogtle is already about $800 million over budget and as has happened so many times, the utilities and the construction firms involved are fighting about who should pay for it. The financing charges are tiny compared to this and the project is almost certain to be well over it’s already huge $14 billion budget. See http://www.ajc.com/business/delays-cost-increases-at-1477334.html

This is consistent with every other reactor built in the US in the last 40 years. All 104 US reactors, except a couple very early on built under fixed price contracts were significantly over budget and delayed years.

Rate payers should strike and stop paying for these expensive and dangerous reactors. http://funologist.org/2012/05/10/breakfast-with-liars-dominion-shareholder-meeting/

Jul 19, 2012 2:39am EDT  --  Report as abuse
KSager wrote:
@Paxus Spot on. We’re not even 7 months into this. I’m a Georgian…I want to see the Federal Government simply walk away. Tom Fanning is playing chicken with them. He thinks they want to see this reactor completed worse than he does and both look bad if the financing “blows up.”

What the Federal Government should do is hold on to its original terms and walk away. They still get to regulate the plant anyway. Then, if the deal does start to implode and Federal help is needed to salvage it…The Feds can either start back with their original terms or increase the terms. If Southern Company either lets the plant implode without help or gets nailed with massive overruns and tries to stick ratepayers without Federal help, either way they look really bad.

The larger chicken game Southern Company does not seem to mind playing lobbying state lawmakers to disincent homeowners from putting solar on their own houses (by prohibiting 3rd party PPA financing). Here is the problem: Southern Company does not realize that rate payers are going to get madder and madder about a big company taking Vogtle chances with their money and not even giving homeowners the freedom to choose solar.

Jul 20, 2012 11:27pm EDT  --  Report as abuse
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