US Energy Dept extends talks with Southern Co on reactor loan

HOUSTON Wed Dec 12, 2012 6:11pm EST

HOUSTON Dec 12 (Reuters) - The U.S. Department of Energy has extended a deadline to work with Southern Co to negotiate terms for a federal loan to support construction of the country's first new nuclear reactor in three decades, a Southern spokesman said on Wednesday.

The DOE awarded a conditional loan guarantee more than two years ago for $8.3 billion to a Southern Co-led consortium to build two 1,100-megawatt nuclear units at the existing Vogtle nuclear station in Georgia. The new reactors will cost at least $14 billion.

In a letter to Southern Co officials this week, the DOE extended a deadline for negotiations until June 30, Southern spokesman Steve Higginbottom said.

In 2010, many utilities were competing for federal loan support viewed as critical to revive the U.S. nuclear industry by helping companies avoid the risk of ballooning costs that accompanied the last round of nuclear construction in the 1980s.

Terms of the Vogtle loan guarantee were expected to be finalized in mid-2012 once Southern and its partners obtained a license to build and operate the Vogtle 3 and 4 units from the U.S. Nuclear Regulatory Commission in February, but the process bogged down over the terms and costs.

Southern unit Georgia Power's share of the loan guarantee is about $3 billion.

Negotiations were further complicated when the DOE added requirements following the much publicized bankruptcy of solar panel maker Solyndra, which had received $500 million in loan guarantees.

Southern's Chief Executive Tom Fanning has said the company is willing to complete the new reactors without federal loan support if necessary.

"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 in July. "If they don't, we don't need the loan guarantee."

Higginbottom said the project can be financed through the capital markets if no loan guarantee is finalized. "That has been our position throughout the process," he said.

The new Vogtle units are scheduled to come online in 2016 and 2017, but a delay in obtaining the NRC license and disputes between the owners and the construction consortium are likely to delay the completion timeline.