CPS agrees to pay share of nuclear costs

December 30, 2009

By Anton Caputo and Tracy Idell Hamilton
San Antonio Express-News

Nuclear Innovation North America argued in court Wednesday that CPS Energy had refused to pay its portion of January’s development costs for the nuclear deal, a move that could kill the project.

But later Wednesday, CPS said it would pay its share of January’s costs, eliminating one of the many legal points of contention between the partners.

"Our sole goal today was to ensure the ability of the STP expansion to continue past Jan. 1, and their decision accomplishes that goal," NRG spokesman Dave Knox said.

NINA is owned by NRG and Toshiba Inc.

The development came just hours after NINA tried to force the issue in court but failed when a Bexar County judge denied its request to force CPS to pay its portion of January’s costs.

NINA officials argued that failure to pay would stall the project, making it worthless and causing the partners to lose their investment. CPS has spent $300 million on the project’s engineering and licensing, a number that will rise to $375 million by February, acting General Manager Jelynne LeBlanc-Burley said.

Wednesday’s salvo was the first in a $32 billion lawsuit filed by CPS earlier this month over the proposal to build two more nuclear reactors at the South Texas Project outside of Bay City.

In its filings and through attorney Ricardo Cedillo, CPS argues that NINA lied to the city-owned utility in order to lure it into the project, and then undertook a "campaign of media misinformation, public threats and disclosure of confidential Project information" to push it out and take control.

Cedillo also alleged that NRG had a "sweetheart deal" with Toshiba, where Toshiba paid NRG roughly $150 million for the right to be the project’s contractor. The two companies then worked together to publicize high cost estimates in the press, Cedillo said, to sour the public and San Antonio City Council on the deal.

"They wouldn’t be the first slick guys from Wall Street that have ever pulled that off," Cedillo said.

NINA attorney Lamont Jefferson characterized the argument as a "vast conspiracy theory" with no evidence. He countered that NRG would have had to foresee that CPS executives would withhold the higher cost estimate from its board and that the resulting bad publicity would cause a political scandal in San Antonio.

An internal CPS investigation into why the cost estimate was withheld has caused two high-level resignations at CPS and prompted the board chairwoman to announce her resignation.

"His theory is we knew all of this is going to happen in advance and that we asked Toshiba, ‘Please, please give us a high cost estimate,’" Jefferson said.

Another point of contention is what happens to a partner’s stake if it pulls out of the project. CPS has not decided to do so, LeBlanc-Burley said, but wants clarification from the court in case it does.

She said that the utility is open to negotiations with NINA outside of the courtroom.

"I still maintain that a business solution is the best option for us, but we haven’t been able to get them to the table," she said.

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