Constellation Energy CEO: 'Time is Running Out' for Calvert Cliffs Nuclear Loan Guarantee

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Researched by Industrial Info Resources (Sugar Land, Texas)--In Thursday's conference call regarding the second-quarter results for Constellation Energy Group (NYSE:CEG) (Baltimore, Maryland), the company's chairman, president and CEO Mayo A. Shattuck III expressed concern about the time required for the loan-guarantee application process for nuclear power construction in the United States. Shattuck warned that Constellation was reducing its spend rate on the Calvert Cliffs nuclear addition project in Maryland because of the long wait for a decision regarding a loan guarantee from the federal government.

"Virtually all countries and jurisdictions in the world that are pursuing new nuclear plants have sovereign support either by ownership or indirectly through policy and regulatory certainty," said Shattuck. "Unfortunately in the U.S., we have struggled to get real federal support in the form of a national energy policy, but we have made significant progress through the loan guarantee program, and through that program, some of the needed sovereign support could be accomplished. Since we operate as a merchant in a competitive market, we understood from the beginning that we would need additional support beyond that provided by a federal loan guarantee."

Constellation's joint venture with Electricite de France (EPA:EDF) (Paris, France), Unistar Nuclear Energy, plans to add a 1,600-megawatt Areva reactor to the two-unit Calvert Cliffs nuclear plant on the Chesapeake Bay in Maryland. The unit will be a "merchant plant," selling electricity on the open market. The project has an estimated total investment value of $12 billion.

The Department of Energy (DoE), however, seems to be slow in granting the loan guarantee needed to move the project forward. "The wait for the conditional DoE loan guarantee in the United States has begun to affect the prospects for the Calvert Cliffs project," said Shuttuck. "While our application is still moving through the DoE approval process, it is taking longer than expected. As a result of this delay and uncertainty, we have begun reducing our spend rate on the project, impacting jobs."

Shattuck noted that consistently low natural gas prices and continually delayed carbon legislation hindered nuclear new-builds. "My message today is a mixed one: We remain interested and focused on pursuing this project," he said. "However time is running out. We definitely can't keep spending without a near-term commitment in the form of a loan guarantee. If that were to be resolved this summer, we will be working to finalize the project cost estimates and determine whether the plant meets our investment profile and risk criteria."

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