* Says loan guarantee process unworkable
* Partner EDF says shocked by withdrawal
NEW YORK, Oct 9 (Reuters) - Constellation Energy Group Incpulled out of a deal to build a nuclear reactor in Maryland with French power company EDF SA , probably killing the multi-billion dollar project.
Constellation said on Friday it had told the U.S. Department of Energy that the terms and conditions of the loan guarantee process for the Calvert Cliffs 3 project were unworkable. EDF said it was shocked by Constellation's decision.
"Constellation knows that we were at the finish line with the Department of Energy and were making significant progress," EDF said in a statement on Saturday.
"Constellation has withdrawn from Calvert Cliffs 3 in spite of our repeated efforts to substantially decrease their exposure and risk to the project."
An EDF spokeswoman said "it is unclear at this point how the project would move forward given Constellation's surprising decision."
Governments around the world, including the United States, are willing to invest billions of dollars in the so-called nuclear renaissance to help meet the growing demand for carbon free energy as they try to tackle global warming.
But energy companies are hesitant to take a chance on the costly reactors without even more government support.
Constellation said it had told the DOE that the cost of the loan guarantee calculated by the Office of Management and Budget (OMB) was unreasonably burdensome and would create unacceptable risks and costs.
"There is a significant problem in the way OMB calculates the credit cost," the company said.
"After repeated unsuccessful attempts to resolve this issue with DOE and OMB, we no longer see a timely path to reaching a workable set of terms and conditions."
Constellation did not say how much the reactor was expected to cost, though using an industry estimate of about $4,500 per kilowatt the proposed Areva SA1,600 MW Evolutionary Power Reactor would be priced at about $7.2 billion.
Constellation said its letter to the DOE represented Constellation's views only. It also said EDF was aware of Constellation's position.
Constellation said UniStar -- the partnership between Constellation and EDF to build new nuclear projects in the United States -- had not withdrawn its application for a federal loan guarantee and no decisions have been made regarding the future of Calvert Cliffs 3.
Constellation's withdrawal from the project puts a further strain on relations between the two companies, which are already entangled in a dispute over a deal signed in 2008 when Constellation was facing serious liquidity issues.
Throwing a lifeline to Constellation, EDF had agreed to buy a 49.9 percent stake in Constellation's operating nuclear business while giving Constellation an option to sell it up to $2 billion of non-nuclear power assets. It is that option is the center of the dispute between the two companies.
Constellation has said that the proceeds from exercising the option could be $1.4 billion, but bankers say EDF would gladly get out of the deal as the market value of gas and coal-fired power assets has declined markedly since 2008.
Sources told Reuters last month EDF is considering a range of options for its U.S. operations, including litigation and selling its stake in Constellation's operating nuclear plants.
EDF is still committed to developing nuclear generation in the United States but could also dissolve UniStar, the partnership it formed with Constellation to develop new nuclear plants in the country, sources have told Reuters.
(Editing by Ted Kerr)
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