HOUSTON (Reuters) - The cost to build a new nuclear power plant in Texas has risen to $10 billion, up from early estimates, but much below price tags of other proposed U.S. nuclear projects, an executive with NRG Energy Inc’s (NRG.N) nuclear development arm said on Tuesday.
The “all in” cost to build two 1,350-megawatt nuclear reactors in South Texas has risen 40 percent from 2006 estimates which did not include financing costs, Steve Winn, chief executive of Nuclear Innovation North America (NINA), told the Reuters Global Energy Summit.
While higher, NINA’s current estimate is more than $10 billion under estimates from other nuclear developers that operate in states where regulators determine how much money utilities can charge customers for new power plants.
The nuclear development partnership formed last year between NRG and Toshiba Corp (6502.T) remains on schedule to get the first new Texas reactor online in 2016, Winn said.
NINA’s goal in developing two new reactors at the South Texas Project nuclear station 90 miles southwest of Houston has been to reduce regulatory, financing and construction risk by partnering with Toshiba and choosing a nuclear design that has been built within budget and on schedule in Japan.
“We know how much concrete; we know how much steel was used in the existing units,” said Winn. “By building a unit that has been built four times before, we have a very specific cost estimate.”
Texas’ competitive electric market also forces NINA to have a firm grip on its costs so it can contract to sell its output at a profit, Winn said.
In a regulated market, utilities are allowed to earn a guaranteed return on their investment in new infrastructure, like power plants, Winn said.
“The incentive in a regulated world is to say the number is huge,” Winn said. “In an unregulated world, the incentive is to say the number is accurate.”
NINA has also narrowed a list of potential partners from more than a dozen identified earlier this year and may announce a sale of a 20-percent stake in the project this year, Winn said. NINA and the municipal utility of San Antonio are currently equal partners in the STP expansion.
The South Texas Project 3 and 4 units are among four projects in final negotiations with the U.S. Energy Department for a piece of the $18.5 billion of federal loan guarantees Winn said are a critical part of NINA’s financing plan.
The economic recession which has cut electric consumption across the country may lengthen the time NINA needs to sign off-take contracts for the new megawatts, but may also serve to help lock-in lower costs for equipment or labor needed by the time the plant has completes the federal licensing process, expected in late 2011 or 2012.
Shares of NRG on Tuesday traded above $24, slightly more than the current value of Exelon Corp’s (EXC.N) hostile tender offer for NRG which expires in late June. NRG executives have repeatedly called Exelon’s offer “inadequate.”
Winn declined to comment on the Exelon offer, but recognized Exelon’s expertise as the largest operator of nuclear plants in the United States. “I wouldn’t mind having access to and building new reactors at their sites,” he said.
Reporting by Eileen O'Grady; Editing by Matthew Lewis, Richard Chang