New reactors too expensive, need more subsidies, Constellation CEO says

[bananas]

http://green.blogs.nytimes.com/2010/09/23/aid-sought-for-nuclear-plants/

September 23, 2010, 6:23 pm
Aid Sought for Nuclear Plants
By MATTHEW L. WALD

The federal loan guarantee program and other aid for new nuclear plants may not be enough to induce Constellation Energy to build a third reactor at its Calvert Cliffs site, 40 miles south of Washington, the company’s president and chief executive said on Thursday.

<snip>

Congress authorized a loan guarantee program for new reactors in 2005 and financed it in 2007, but so far only one such guarantee has been made, for a twin-unit reactor project near Waynesboro, Ga., that is being built by the Southern Company and two partner utilities. The loan guarantee for that project is for 70 percent of the amount that Southern is borrowing.

<snip>

The guarantee is a bit like a parent’s co-signing a car loan by a child. The cost to the parent could be zero, but large if the child defaults.

<snip>

In remarks to reporters later, he said that one solution would be for the government to subsidize the fee that a borrower would pay for a guarantee on a loan that the government considered high-risk. Or there could be other answers, he said. He declined to get more specific, but warned that without more aid, the financing could “dwarf the economics of the project.’’

<snip>

The Times got one thing wrong - it's not like a parent co-signing a car loan by a child, it's like a parent paying for one childs car by not letting another child go to college:

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=115x231521

Nuclear Loan Guarantees Aren’t Just Guarantees: They are Actual Taxpayer Loans

http://www.nirs.org/press/02-17-2010/1

February 17, 2010
Nuclear Loan Guarantees Aren’t Just Guarantees: They are Actual Taxpayer Loans

President Obama’s announcement yesterday of a “conditional” $8.3 billion loan “guarantee” to the Southern Company for construction of two nuclear reactors in Georgia obscured an important fact about the loan guarantee program: taxpayers are not just providing a guarantee, they also will be providing the actual loans.

According to a press release from Southern Company yesterday, “Total guaranteed borrowings would not exceed 70 percent of the company's eligible projected costs, or approximately $3.4 billion, and are expected to be funded by the Federal Financing Bank.” (Note: the discrepancy in amounts--$3.4 billion vs $8.3 billion, is because Southern Company is only a partial owner of the two reactors, the rest of the funds will go to the other owners).

The Federal Financing Bank (FFB) is a little-known government entity that more typically makes loans to universities, colleges, rural electric co-ops and other small-scale projects. Interest rates from the FFB may be lower than offered by private financial institutions. Use of the FFB means that the loans themselves for new reactor construction will come from taxpayers, putting taxpayers in the risky business of both providing the loans and guaranteeing to themselves that the loans will be repaid.

<snip>

Kristopher was right: he said that even with the loan guarantees, they wouldn't find any takers, and they didn't:

<snip>

You could send a lot of kids to college for $8 billion. Instead, it will be wasted on these nuclear boondoggles. Obama should revoke those loans and cancel this stupid Bush-era project.

[xchrom]

1. it will always be thus with that 'industry'. nt

[msongs]

2. corporate welfare whores looking for payoffs from their political toadies lol nt

[txlibdem]

12. Yup. Business as usual for the banking industry

So now that it's the nuclear power industry we all must be up in arms about it?!?

Does anyone know how much money $12 Trillion is? That is how much money the Federal Reserve has guaranteed to the big banks at next to zero interest.

Tell me again how upset you are about an 8 billion dollar nuclear plant?

[kristopher]

13. The banking industry?

The money is guaranteed by taxpayers and the lender is another government program.

You are so pronuke I'll bet you glow in the dark.

[kristopher]

3. A government subsidy to pay the fee for the default subsidy?

In remarks to reporters later, he said that one solution would be for the government to subsidize the fee that a borrower would pay for a guarantee on a loan that the government considered high-risk. Or there could be other answers, he said. He declined to get more specific, but warned that without more aid, the financing could “dwarf the economics of the project."

In case people don't know how this works, it goes like this.

The government kicked the loan guarantees up from 50% to 80% of project cost because the costs are so great. This requires that the payback times extend so far into the future that predicting energy costs is impossible. This uncertainty is supposedly what is holding investors back.
To get that 80% loan guarantee, the borrowers are required to pay a fee upfront that is equal to that project's equal share of the "best guess" losses across the entire program. In other words if the total program is $50 billion spread across 7 projects and the Office of Management and Budget and Congressional Budget Office anticipate all but 2% of the $50 billion program will be repaid, then the anticipated 2% loss of $1 billion would be spread across the seven projects. If they all used an equal portion of the program that would come to about $143 million per project.

Additional funds are available under the regulations of some utilities by instituting rate increases that guarantee the payback of investors in the nuclear projects whether or not the plant ever generates electricity or not. This is how the projects under way are financing the other 20% not covered by the loan guarantees. No projects are being planned for jurisdictions that do not allow this practice.

There are a number of other guarantees also in place; for example, if they find a design flaw and have to tear down everything and start over, a significant portion of the cost is paid by taxpayers.

Now, they don't want to have to pay the fees?

Maybe it has something to do with the fact that there is no way to avoid the conclusion that most of the loans will probably go into default because of rapidly declining renewable energy costs and the rapid rate of expansion of renewable energy.

[DrGregory]

4. Sorry - it's a done deal

Obama should revoke those loans and cancel this stupid Bush-era project.
--------------------------------------

First Obama can't unilaterally revoke the loans - they are
a provision of a LAW passed by Congress and signed by
President Bush.

Obama can NOT revoke a LAW unilaterally - that has to be
done by another bill passed by Congress.

However, in this case the loans have ALREADY been awarded.
The Government has signed a legally enforceable instrument.

Under those circumstances, Congress can NOT rescind because
that would be an ex post facto law forbidden by the Constitution.

The loans are a done deal.

Dr. Greg

[madokie]

5. The nukies are bleeding us dry

[kristopher]

6. They are certainly trying their best...

The good news is that Bush's energy bill only included $18B in loans covering 50% of the cost of an initial run of "proof of concept" reactors and policies where the starting price per reactor was about $2B per and was expected to decline.

BEFORE THE MONEY COULD GO OUT THE DOOR HOWEVER, THE PRICE OF THE REACTORS SHOT UP TO $8-10B PER.

Instead of rethinking the entire concept of using nuclear, the nuclear industry lobbyists managed to persuade the administration to pump the amount up to $50B and raise the amount of costs covered to 80%.

That policy is not yet law.

Call your representative.

[kristopher]

7. Call your reps and call them often.

[kristopher]

8. Kick

[kristopher]

9. EDF (French nuclear powerhouse) reconsiders Constellation agreement

EDF reconsiders Constellation agreement

By Helen Thomas and Ed Crooks in New York

Published: September 28 2010 03:09 | Last updated: September 28 2010 03:09

EDF is rethinking the future of its US business as the French electricity group seeks to defuse a mounting dispute with Constellation Energy, its partner in its US nuclear operations.

While EDF remains committed to building new nuclear plants in the US, people familiar with the matter said, the partnership with Constellation could be unwound.

The companies are at loggerheads over a deal struck two years ago that allowed Constellation to sell gas and coal-fired power, generating assets to EDF for up to $2bn.

The option, which expires at the end of this year, was intended to offer Constellation additional cash, if needed, after the Baltimore-based power provider hit trouble in 2008.

Constellation’s funding position has since improved, while the value of power-generating assets has tumbled as commodity prices have slumped.

Analysts from Jefferies estimated in March that the plants were worth about $450m compared with $1.4bn in after-tax proceeds under...

http://www.ft.com/cms/s/0/4c94f636-ca8c-11df-a860-00144feab49a.html

[kristopher]

10. This complements the post about Constellation made today so I dredged it up. nt

[bananas]

11. You were right

link to the other thread: http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=115&topic_id=260859&mesg_id=260943