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UPDATE 2-NRG seeks partner for Texas nuclear project

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HOUSTON, Feb 13 (Reuters) - NRG Energy Inc NRG.N Chief Executive David Crane said on Friday the company will move forward to find a 20-percent partner for the $8 billion expansion of the South Texas nuclear station in Texas.

Crane said the company has identified 15 potential parties it believes will be interested in joining NRG and the municipal utility in San Antonio in expanding Texas’ largest nuclear plant by 2016. The plant has two existing reactors.

The South Texas Project expansion recently passed several milestones that will make it attractive to existing nuclear operators, or possibly a private equity investor, Crane said.

“There will be interest,” Crane said before addressing a nuclear panel at the Cambridge Energy Research Associates annual conference in Houston.

Most importantly, Crane said the expansion project has become a finalist in the heated race for a federal loan guarantee, support viewed as critical for the next round of nuclear construction.

While 17 companies seek licenses to build new reactors, loan guarantees from the Energy Department will determine which projects move forward, Crane told CERA attendees. “The DOE will pick the winners,” he said.

With a budget of $18.5 billion, “only two or three projects will qualify for loan guarantees,” Crane said. “We fully expect to be one.”

Congress has not included any additional funds for loan guarantees in the economic stimulus package under consideration in Washington as the nuclear industry’s trade group had called for to spur investment.

On Thursday, NRG said it completed an engineering and construction contract with its technology partner, Toshiba America Nuclear Energy 6502.T, to build two 1,350-megawatt reactors at the existing two-unit station about 90 miles southwest of Houston.

Also this week, the Nuclear Regulatory Commission issued a schedule to complete a review of the license application for the South Texas expansion by 2012. NRG’s application, filed in 2007, was the first for new reactors to be submitted with the agency in nearly 30 years.

The engineering contract and the NRC action “make this project very real to people,” Crane said.

Crane said NRG is looking for a partner that can bring nuclear operating experience, a company interested in developing additional reactors or that can offer access to different sites for future reactors, such a major oil company interested in locating a reactor at an existing refinery site.

He was doubtful that Exelon Corp EXC.N, the nation's largest nuclear operator, would be among those interested in a minority stake in the South Texas Project.

Exelon, which is pursuing a $6 billion hostile bid to buy NRG, also has proposed a new nuclear plant not far from the South Texas site.

Exelon’s project, however, stumbled after dropping its initial technology design late last year. A new design will require the company to amend its NRC license application, delaying the review process.

Crane said he is no hurry to find an investor as the project’s value will only increase as it moves closer to reality, Crane said.

“We may decide to maximize the value by waiting a year,” Crane said.

The new units will be owned by a NRG/Toshiba venture, called Nuclear Innovation North America, and CPS Energy of San Antonio. Toshiba owns a 12 percent equity stake in Nuclear Innovation North America. (Reporting by Eileen O’Grady; Editing by Walter Bagley)

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