DOE drops Luminant Texas from nuclear loan talks

HOUSTON Fri May 8, 2009 12:40am BST

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HOUSTON May 7 (Reuters) - Comanche Peak Nuclear Power Co's two-reactor expansion planned in Texas has dropped to "first alternate" in the heated competition for $18.5 billion in government-backed loans that developers say will be critical to advancing the first round of nuclear plant construction in three decades, a spokeswoman said on Thursday.

A Department of Energy official confirmed that the agency has cut to four the number of new nuclear projects being considered for the first round of federal loan guarantees.

Nuclear power generates about 20 percent of U.S. electricity and proponents say nuclear energy is attractive because it emits none of the heat-trapping carbon dioxide and other gases released by fossil-fuel plants, such as coal.

The Energy Department has selected projects for "final due diligence and negotiations that may lead to a commitment for a conditional loan guarantee," said another company spokesman familiar with the process.

The energy agency has not identified any company seeking federal support, but officials at another Texas nuclear project, one in Maryland and one in South Carolina confirmed earlier this year that they were among the five finalists for DOE loan backing.

Those projects included NRG Energy's (NRG.N) two-unit expansion at the South Texas Project in Texas; Unistar Nuclear Energy's Calvert Cliffs 3 reactor in Maryland; and SCANA Corp's (SCG.N) two-unit expansion at the Summer station in South Carolina in conjunction with state-owned utility Santee Cooper.

Also believed to be on DOE's short-list is Southern Co's (SO.N) two-reactor expansion at the Vogtle nuclear station in Georgia.

A Southern spokeswoman declined to comment specifically on Vogtle's status in the DOE process Thursday. "We believe our project is a good fit" for the DOE loan program, said Beth Thomas of Southern's nuclear unit.

A spokesman for Dallas-based Luminant, part of Energy Future Holdings, said Comanche Peak Nuclear was notified that the project was not included in the next phase of DOE due talks, but remains "the first alternate."

"We did not expected to be awarded a DOE loan guarantee yet but we are encouraged that the program is moving forward," said Ashley Monts of Luminant which is working with Mitsubishi Heavy Industries (6502.T) to develop the new reactors.

Unistar spokeswoman Maureen Brown said the company has yet to get official word of DOE's latest action, but is "eager to move forward with due diligence and negotiations"

"It is our hope that, if notified, we would receive a conditional commitment by year-end and begin preliminary site work at the Calvert Cliffs site," said Brown of Unistar, a joint venture of Constellation Energy CEG.N and EDF Group (EDF.PA) of France,

Initially, developers of 14 new nuclear plants requested DOE guarantees totaling $122 billion, far exceeding the program's budget. Several companies dropped out, leaving 10 projects at the end of last year.

With a cost of $5 billion to $12 billion for each new reactor, depending on size and design, the DOE program is expected to fund only a few projects, but developers have said the guarantee is critical to obtaining financing. (Editing by Christian Wiessner)

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