July 19, 2012 / 3:02 AM / 7 years ago

Southern Co CEO says U.S. nuclear loan guarantee less enticing

* Lower financing costs to benefit Southern nuclear, coal projects

* Southern Power builds nation’s largest biomass plant in Texas

By Eileen O’Grady

NACOGDOCHES, TEXAS July 18 (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.


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.

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