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NRG Energy, CPS Energy settle dispute over funding for new nuclear reactors
12:00 AM CST on Thursday, February 18, 2010
The nuke goes on.
NRG Energy Inc. and CPS Energy said Wednesday that they've resolved their differences over funding for two new nuclear power reactors at the South Texas Project. The resolution keeps the project in the running for the federal loan guarantees necessary to finance Texas' first new reactors in decades.
Rather than own half of the expansion project as originally planned, CPS, the San Antonio municipal utility, will hold just 7.625 percent. CPS will stop paying money into the investment, and NRG will be responsible for the rest of the financing.
"With this agreement, we can continue developing one of the leading nuclear power projects in the country," Steve Winn, chief executive of Nuclear Innovation North America LLC, said in a statement. NINA is a joint venture created by NRG and Toshiba Corp. to build the reactors.
NINA officials have said they plan to sell stakes in the $10 billion project to other investors.
NRG shares closed Wednesday at $22.59, up 10 cents.
CPS and NRG had been planning the project for years. But last year, the two disagreed over projections for the reactors' cost. The problem escalated politically in San Antonio, CPS sued NRG, and NRG countersued.
NRG chief executive David Crane held a conference call last month to warn analysts that the project might die. He said at the time it would be hard to continue working with CPS.
"When you develop a project like this, you have to be able to look the person in the eyes and on some level trust them. That just doesn't seem to exist right now," Crane said on the call.
The lawsuits were filed just as the Department of Energy was about to award loan guarantees for nuclear projects.
The South Texas Project is a top contender, but company officials worried that the lawsuits over ownership stakes make the project unappealing for federal help. And winning a loan guarantee now is important, because Crane said there's no telling when or if the Department of Energy will award more.
On Tuesday, the department awarded the first loan guarantee to Southern Co. to build two reactors in Georgia.
Earlier this month, Public Utility Commission Chairman Barry Smitherman stepped in as a marriage counselor of sorts.
He invited top executives from both companies to his office to work out a deal.
"CPS Energy and NINA both acknowledged that a Feb. 12 meeting organized by Public Utility Commission Chair Barry Smitherman was integral to the parties coming to an agreement," CPS said in a statement.
The companies said Wednesday they agreed that CPS' stake in the expansion is worth $1 billion. That includes money CPS has paid to develop the reactors, plus the value of the land and the water rights that CPS owns at the power plant site.
The South Texas Project already has two reactors.
NRG operates the plant and owns 44 percent, CPS owns 40 percent, and Austin Energy owns 16 percent.
NINA will pay CPS $80 million and donate $10 million to a residential energy assistance program.
Both sides will drop their lawsuits.
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