[NukeNet] Nuclear power, banks link up in bid to get better financing

[Diane Farsetta]

http://thehill.com/the-executive/nuclear-power-banks-link-up-in-bid- 
to-get-better-financing-2007-05-24.html

Nuclear power, banks link up in bid to get better financing
By Kevin Bogardus
May 24, 2007

The nuclear energy industry and the country’s top banking  
institutions have together applied pressure on the Office of  
Management and Budget (OMB) to secure more comprehensive loan  
guarantees for new power plants. And lawmakers are responding by  
considering legislation that would ensure those guarantees.

In a meeting in April with OMB, a representative from the Nuclear  
Energy Institute (NEI), electric utility executives and a banking  
official pushed for complete loan guarantee coverage that could cover  
80 percent of a project’s cost. Without better coverage, say nuclear  
energy advocates, the nuclear “renaissance” could be seriously derailed.

Since the April meeting, the Department of Energy (DoE) has proposed  
that the federal government cover 90 percent of loan guarantees,  
higher than its original guidelines of 80 percent, released in August  
2006. DoE’s proposed coverage under Title XVIII of the Energy Policy  
Act of 2005, however, has left many in the nuclear industry  
dissatisfied because they seek 100 percent coverage.

“There either will be no or limited new nuclear plants developed  
without a workable loan guarantee program,” said Peter Saba of Paul,  
Hastings, Janofsky & Walker.

Saba, who represents nuclear energy companies and served in the DoE  
in the George H.W. Bush administration, attended the meeting and said  
that in the banking community, “there is not going to be any  
financing” unless the loan guarantee is fixed.

Loan guarantees by the federal government act as default protection  
for private lenders when they help finance massive projects, like  
nuclear power plants, to take into account certain risks and possible  
delays.

In materials circulated to OMB, executives from financial  
institutions including Credit Suisse and Lehman Brothers wrote that  
“lenders and investors in the fixed income markets will be acutely  
concerned about a series of major risks, including the possibility of  
delays in commercial operation of a completed plant.” They also made  
clear they wanted to avoid “another Shoreham” — referring to the  
decommissioned Long Island nuclear power plant that saddled residents  
with huge electric rates without producing any power.

The NEI provided a stark assessment by its New Plant Finance Task  
Force, a group of nuclear executives across the country. Without  
better loan guarantee coverage, the task force argued, companies  
would have difficulty in financing new plants, which can cost as much  
as $4 billion.

And even at 90 percent, financing the plan “will probably not be  
workable,” said Richard Myers, NEI’s vice president of policy  
development, who also attended the OMB meeting. Myers also said his  
trade group met separately with DoE to discuss the issue.

Nuclear power makes up a substantial share of the country’s  
electricity usage, providing close to 20 percent of America’s power,  
according to NEI’s website. Citing climate-change concerns, the trade  
group believes nuclear energy is vital for the nation’s energy  
portfolio. And the group’s allies on Capitol Hill argue that the rule  
is not in line with the 2005 bill.

“I believe that these proposed rules still are not as expansive as  
they should be and do not reflect the vision of the Energy Policy Act  
of 2005,” said Sen. Pete Domenici (R-N.M.), a main sponsor of the act  
and one of Congress’s most ardent nuclear advocates, in a statement.

In response, DoE said its rule should match the 2005 act’s  
requirement for 80 percent coverage of a project’s cost.

“To increase our energy security and reduce greenhouse gas emissions,  
we are anxious to support projects that employ promising clean energy  
technologies while protecting the taxpayer dollar from the potential  
financial risks of these projects,” said Megan Barnett, an agency  
spokeswoman, when asked why DoE did not propose total coverage.

Staff members for Domenici have been meeting with aides for his New  
Mexico counterpart, Sen. Jeff Bingaman (D), the chairman of the  
Senate Energy and Natural Resources Committee, to discuss the issue.

The rule would affect not only nuclear power but producers of  
biofuels and other alternative energies. Renewable-energy company  
executives have also testified before members of the committee on the  
loan guarantee issue.

Like Domenici, House members involved in energy legislation have  
expressed reservations on loan guarantee coverage. Earlier this  
month, before the rule was proposed, four representatives, including  
John Dingell (D-Mich.) and Joe Barton (R-Texas), the chairman and  
ranking member of the House Energy and Commerce Committee, wrote to  
the White House about the issue.

The House has draft legislation online that would force DoE to  
increase its loan guarantee coverage to 100 percent. The Senate has  
already introduced a bill to do so.

In the interim, the NEI plans to address the proposed rule during its  
45-day public comment period. Saba expects other nuclear power  
companies will comment on the rule as well.