[ RadSafe ] Southern Co. Expects Nuclear Loan Agreement By Friday

[Perle, Sandy]

Southern Co. Expects Nuclear Loan Agreement By Friday
Christine Buurma
JUNE 15, 2010
The Wall Street Journal

NEW YORK (Dow Jones)--Southern Co. (SO) is "on track" to meet the Friday deadline for accepting a conditional loan guarantee from the federal government for two new nuclear reactors at the Vogtle plant in Georgia, a Southern spokesman said.

In February, the $14.5 billion Vogtle project became the first new nuclear reactors in the U.S. to be awarded a loan guarantee by the Department of Energy. Under the loan guarantee program, the government pledges to cover a company's debt obligations if the company defaults on loans used to finance a new nuclear power project. Because building a nuclear power plant is a massive, multi-billion-dollar undertaking, loan guarantees can be key to financing such projects.

"We are on track to meet the deadline and expect to have an agreement," Southern spokesman Jason Cuevas said late Monday.

Southern had 90 days to accept the guarantee, but the company was granted a 30-day extension last month. Although Southern hasn't revealed why an extension was needed, other utilities have expressed concern that the government's upfront fee for securing credit might be too costly. Utilities have said that in some cases, the DOE has proposed a fee as high as 10%. The fee is based partly on an Office of Management and Budget risk calculation that's used to determine the likelihood of loan default.

An Energy Department spokeswoman didn't immediately return a call for comment.

As a large, regulated electric utility with a strong balance sheet, Southern is likely to have a lower credit fee than some of the other companies vying for nuclear loan guarantees. NRG Energy Inc. (NRG) and UniStar Nuclear Energy, a joint venture between Constellation Energy Group (CEG) and French energy giant EDF (EDF.FR), plan to develop new nuclear reactors on a "merchant" basis, which means the companies can't recover project costs by raising electric rates.

Southern's partners in the Vogtle project, municipal electric utility MEAG Power and public power cooperative Oglethorpe Power, have already accepted their portions of the $8.3 billion loan guarantee.

Southern's share of the guarantee would allow the company to borrow up to $3.4 billion. The company expects the new reactors to be completed in 2016 and 2017.

The company can't draw on the loan guarantee until the Vogtle project receives a combined construction and operating license from nuclear regulators. Southern expects to receive the license by the end of 2011.

Congress has so far appropriated a total of $18.5 billion for the nuclear loan guarantee program, but the Obama administration asked Congress last month to approve $9 billion more for the program.


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