Constellation Energy Group Inc. will not break ground on a new nuclear plant in Maryland next year unless a federal loan-guarantee program is in place, an executive from the power company said Wednesday.
"If the loan-guarantee program is able to materialize in early 2008 so we are able to secure loan guarantees for construction of a new plant at the end of 2008," the company's board could move forward, said Michael Wallace, president of Constellation Energy Generation Group. "If it doesn't, we won't."
The Energy Department last month said it will guarantee loans for up to 80 percent of the construction cost of new nuclear reactors, but that budget constraints mean the earliest any company proposing a new reactor could benefit is 2009.
Energy Secretary Samuel Bodman said then that he would seek "substantial" budget increases for loan guarantees to support seven to eight nuclear plants.
"The trend line is positive and encouraging, but today we're not there," Wallace said at a conference in Washington, referring to the industry's ongoing dialogue with the Energy Department, Congress and the White House. But he said it's not a question of whether it will happen, but when.
Three companies already have submitted complete construction and operating license applications for new reactors to the Nuclear Regulatory Commission, and Constellation filed a partial application earlier this year for a proposed new reactor in Lusby, Md.
Dominion Resources Inc. on Tuesday became the third company to file a complete application for a new nuclear reactor, at its North Anna Power Station in Louisa County, Va., following the Tennessee Valley Authority, which last month applied for new reactors at the Bellefonte nuclear power station near Scottsboro, Ala. NRG Energy Inc. in September was the first company in about 30 years to submit a new application to build and operate new reactors, at its Bay City, Texas, power plant site.
No companies have committed to building new plants, which are expected to cost more than $5 billion, without a reliable loan-guarantee program because of the risks to their financial health, Wallace said.
Constellation's market cap is nearly $18 billion, compared with about $54 billion for Exelon Corp., the nation's largest nuclear producer. Neither can afford to bet its balance sheet on a single project, he added.
Global competition for resources also will tighten. French nuclear engineering company Areva SA this week said it hopes to sell as many as six more nuclear reactors to China following a record $11.9 billion order to build and supply fuel for two. Constellation also has a joint venture for the new reactors with Areva.
"The supply chain, which is already pretty thin, is going to be really, really stressed," Wallace said.
Besides financing, other business concerns to consider include the regulatory process, environmental issues, waste management and the ability to produce electricity at a competitive price, said Marvin Fertel, senior vice president at the Nuclear Energy Institute trade group. Nuclear regulators say the review process for new plants will take up to 42 months.
If CEOs are considering building a new coal or nuclear plant, they know it will be a 10-year project and that means they will get blamed if it fails, and their successors will likely get the credit if it succeeds, Fertel said.
Wallace said 2015 is the earliest possible date that Constellation's new reactors would come online, and that could get pushed back by three years because of the lack of loan guarantees and other risks.
Shares of Baltimore-based Constellation dipped 81 cents to $97.61 in afternoon trading.
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