Sale of Nuke Plant Key for Business

["Sandy Perle" <sandyfl@earthlink.net>]

Sunday March 14, 12:53 pm Eastern Time

Sale of Nuke Plant Key for Business

MIDDLETOWN, Pa. (AP) -- Anybody want to buy a nuclear 
reactor? Surprisingly, some people do, at a bargain price, 
undeterred even by a neighbor with a troubled history.  

An eager buyer is snapping up Three Mile Island's healthy reactor, 
in the first sale in U.S. history of a nuclear power plant in its 
entirety.  

The reactor, still churning out electricity, sits next to the shell of its 
twin, TMI's No. 2 reactor, the site of the country's worst nuclear 
power accident.  

The deal marks a dramatic shift in the industry as it faces its 
biggest challenge since that accident 20 years ago this month: 
how to survive with high-priced nuclear reactors against coal and 
modern natural gas plants in the competitive electricity market.  

GPU Inc. of Morristown, N.J., is selling the plant to AmerGen, a 
partnership of Philadelphia-based PECO Energy Co. and British 
Energy. Analysts are watching this deal, as well as others to 
follow, to see if they are profitable.  

The Entergy Corp. (NYSE:ETR - news), based in New Orleans, is 
expected soon to complete the purchase of the Pilgrim plant in 
Plymouth, Mass., from Boston Edison. Like GPU, Boston Edison 
is getting out of the electricity generation business, and Entergy is 
pushing to become ``a national nuclear company.''  

``Bottom-line dollars and cents realism'' determines the viability of a 
nuclear plant, says Roger Gale, an analyst at the Washington 
International Energy Group.  

The consulting firm predicts 37 to 40 reactors of the 103 now 
operating in the country will not survive in the new electricity 
market.  

Industry experts cite several factors that help plants to compete: 
shedding huge indebtedness stemming from their high construction 
costs; a reputation for good management; and avoiding trouble with 
federal regulators.  

Dozens of utilities, most with just a single nuclear plant, are 
looking to sell while others are leaving the electricity generation 
business to concentrate on power distribution.  

Seeking to buy are industry executives convinced they can get a 
bargain and make money by operating reactors for the next few 
decades.  

``In general you're able to buy nuclear for next to nothing ... and 
that could bring a renaissance'' to the industry, says Robert Rubin, 
an analyst for Bear Stearns & Co.  

Adds Corbin McNeill Jr., chairman of PECO Energy Co.: ``There 
will be a continued consolidation.''

He says some uneconomical plants will shut down while others 
that are attractive will make money -- at the right price. McNeill 
predicts fewer than 10 of the current 43 nuclear operators will 
remain in five or so years.  

Companies such as Amergen, Entergy, and Duke Energy in 
Charlotte, N.C., think that by consolidating and becoming ``national 
nuclear companies'' they can operate many of these plants 
profitably and safely.  

Because reactor fuel is about a third cheaper than fossil fuels, 
nuclear plants compete in producing electricity, the industry 
argues.  

In 1997 it cost 2 cents a kilowatt hour to produce electricity from 
some of the most efficient nuclear reactors. That is a bit more than 
from coal but below the overall average of 2.13 cents from all fossil 
fuel plants. The average cost for all nuclear plants was 2.48 cents, 
according to the federal Energy Information Administration.  

AmerGen, the PECO joint venture, will get the TMI reactor for less 
than 20 cents on the dollar: $23 million plus another $77 million for 
the fuel already contracted. The seller will put up the money to pay 
for the eventual shutdown of the reactor, whose value on GPU's 
books is $600 million.  

``It's a phenomenal deal,'' analyst Rubin said. Not counting the fuel 
purchase, the TMI reactor is selling for about $30 per kilowatt of 
generation. By comparison, GPU recently sold its fossil fuel 
generation plants at 2.5 times their book value at $510 per kilowatt. 
 

In addition to the TMI reactor, industry analysts say AmerGen had 
pursued -- and then rejected -- purchase of the Maine Yankee 
reactor in Wiscasset, Maine; recently indicated an interest in the 
Vermont Yankee reactor in Vernon, Vt.; and may have interest in 
GPU's other reactor at Oyster Creek in Lacey Township, N.J.  

GPU's chairman, Fred Hafer, believes the TMI sale helps his 
company, which foresees its future as electricity distributor, not 
power plant owner.  

The deal, too, provides relief for GPU by freeing the company from 
``the overhanging liability'' and uncertainties of nuclear power.  

``With the nuclear industry you can't be successful with being just 
a dabbler in the business,'' Hafer said in an interview.  

Many other utilities executives agree.

------------------------
Sandy Perle
E-Mail: sandyfl@earthlink.net
Personal Website: http://www.geocities.com/capecanaveral/1205

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