South Texas nuke plant gets government loan boost

June 18, 2009

San Antonio Express-News

Plans to expand the South Texas Project nuclear plant gained a strong endorsement Wednesday from the federal government, which picked the project as one of four in the nation eligible to split $18.5 billion in loan guarantees.

The move advances the plan by CPS Energy and partner NRG Energy to build the first U.S. nuclear reactors in 30 years, and could signal a revival of the nation's nuclear industry.

Mike Kotara, CPS' executive vice president of nuclear development, said the project's selection is "absolutely" good news.

CPS officials have said federal loans are essential if the utility is to go forward with adding two reactors to the South Texas Project nuclear plant near Bay City.

Kotara said he doesn'tknow when the final decision on which projects will get loan guarantees will be made.

A loan guarantee means the government would take on the project's debt if NRG and CPS default on the government's loan.

"These projects are very large in scale, and so they're very technically complex," Kotara said. "Because of their size, financing is a critical element."

While city-owned CPS hasn'tcommitted to building to nuclear addition yet, it has spent or budgeted $276 million on planning and engineering.

It's too early to say how much of the $18.5 billion the CPS-NRG project could receive, Kotara said. The next step calls for the Energy Department to negotiate with CPS and NRG, talks that would lead to a commitment under the department's loan program, NRG said in a statement.

The Energy Department's selection of the CPS-NRG nuclear expansion "comes as no surprise to us," said Tom Smith of the consumer advocacy group Public Citizen. "But it really doesn'tchange the math for the folks in San Antonio. They'll end up paying for this overpriced source of electricity if it's built.

"The loan guarantee only means that there's a source of money. It doesn'tmean ratepayers will get off the hook in paying for the plant's expansion."

CPS officials repeatedly have said that electricity from the South Texas Project is reliable and helps keep prices low for San Antonio ratepayers. Building the 2,700-megawatt nuclear expansion would be enough to power more than 2 million homes, CPS and NRG say.

CPS owns 40 percent of the existing South Texas Project, and could own as much as 50 percent of the expansion.

So far, CPS has been mum about the project's price tag, but plans to talk cost for the first time at its board meeting June 29.

NRG's Steve Winn, vice president of nuclear development, recently said the two reactors to be added to the South Texas Project will cost about $10 billion, a sum that nuclear critics derided as a lowball figure.

Public Citizen commissioned a study that said the two-reactor project could cost as much as $22 billion.

Getting a federal loan guarantee could keep the nuclear expansion on its planned timeline, CPS said. Construction of the reactors could begin when the Nuclear Regulatory Commission grants CPS and NRG a license. That application is pending and could be approved in early 2012, Kotara said.

Given that time frame, the first reactor could be online in 2016 and the second in 2017.

NRG hopes to borrow 80 percent of the cost of two reactors while holding a 20 percent equity stake in the project, NRG spokesman Dave Knox said Wednesday.

NRG also is pursing more loan guarantees from the Japanese government. Japan's Toshiba is a partner in the nuclear development company created to handle the nuclear expansion.

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