The corrected release reads:
Constellation Energy Releases Statement Regarding U.S. Department of Energy Loan Guarantee
Constellation Energy /quotes/comstock/13*!ceg/quotes/nls/ceg (CEG 32.15, +0.18, +0.56%) on October 8 informed the U.S. Department of Energy (DOE) that it cannot move forward with the loan guarantee process regarding UniStar Nuclear Energy's Calvert Cliffs 3 loan guarantee application because the proposed terms and conditions are unworkable.
In a letter sent to DOE, Constellation Energy said the cost of the loan guarantee that is calculated by the Office of Management and Budget (OMB) is unreasonably burdensome and would create unacceptable risks and costs for our company. There is a significant problem in the way OMB calculates the credit cost. After repeated unsuccessful attempts to resolve this issue with DOE and OMB, we no longer see a timely path to reaching a workable set of terms and conditions.
The letter represents the views of Constellation Energy. EDF, our partner in UniStar, is aware of our views. UniStar has not withdrawn its application for a federal loan guarantee and no decisions have been made regarding the future of Calvert Cliffs 3. With regards to Calvert Cliffs 3, this is a matter that will have to be discussed by Constellation Energy and EDF and taken under consideration by UniStar's Board of Directors. EDF has not yet informed Constellation Energy of its position related to the pending loan guarantee terms and conditions.
Constellation Energy remains steadfast that new nuclear power facilities are critical to the long-term economic, environmental and national security interests of the United States, which is why we have worked so hard for the past five years to make Calvert Cliffs 3 a reality. We are deeply disappointed that the loan guarantee process did not play out as we had hoped. We are extremely fortunate and grateful to have had a tremendous amount of support from our communities, labor, our state and county government, and our congressional delegation.
About Constellation Energy
Constellation Energy (www.constellation.com) is a leading supplier of energy products and services to wholesale and retail electric and natural gas customers. It owns a diversified fleet of generating units located in the United States and Canada, totaling approximately 9,000 megawatts of generating capacity, and is among the leaders pursuing the development of new nuclear plants in the United States. The company delivers electricity and natural gas through the Baltimore Gas and Electric Company (BGE), its regulated utility in Central Maryland. A FORTUNE 500 company headquartered in Baltimore, Constellation Energy had revenues of $15.6 billion in 2009.
Forward-Looking Statements
We make statements in this press release that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934. These statements are not guarantees of our future performance and are subject to risks, uncertainties and other important factors that could cause our actual performance or achievements to be materially different from those we project. For a full discussion of these risks, uncertainties and factors, we encourage you to read our documents on file with the Securities and Exchange Commission, including those set forth in our periodic reports under the forward-looking statements and risk factors sections. Except as required by law, we do not intend to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
SOURCE: Constellation Energy
Constellation shelves proposal for Calvert Cliffs reactor
Constellation Energy has shelved its proposal to build a new reactor at its Calvert Cliffs nuclear power plant, Obama administration officials said Friday, even though the administration had decided to award the project a $7.5 billion loan guarantee.Senior administration officials said Constellation's decision was "a surprise," but a Constellation Energy spokesman Larry McDonnell said that the administration's loan guarantee terms were "unworkable" and that Constellation had told the Energy Department "we can't move forward."
The decision by Constellation deals a blow to the idea of a U.S. nuclear renaissance. Constellation and French power company Electricité de France are partners in Unistar, a joint venture that had intended to make the new Calvert Cliffs reactor the first of a fleet of identical units around the country. They filed the loan guarantee application in July 2007.
But economic factors have made nuclear power projects more challenging. Low natural gas prices make that fuel an attractive alternative. Congress also failed to pass climate legislation that would have boosted fossil fuel prices. And steep construction costs make the projects a financial stretch for utilities like Constellation.
House Majority Leader Steny H. Hoyer (D-Md.), who said he had "been working very hard to secure a loan guarantee" for the project, called Constellation's decision a "disappointment."
"Despite significant movement by the administration on the loan package to more favorable terms for the companies, Constellation Energy has indicated that it cannot move forward with the loan guarantee process at this time," he said. He said he would seek ways to revive the proposed project.
EDF also said it was "disappointed and shocked" that Constellation had "unilaterally decided" to withdraw from the project. "Constellation knows that we were at the finish line with the Department of Energy and were making significant progress," said an EDF spokeswoman. She said that the Calvert Cliffs reactor was "of monumental importance to Maryland" and would have generated 4,000 new jobs.
Obama administration officials said that they had proposed terms consistent with their fiduciary duty. "We want to see this industry go forward, but we also have a duty to protect the taxpayers' money," one senior administration official said.
The administration has approved only one conditional loan guarantee for a nuclear power project and that went to a Georgia plant to be built by Southern Co., which under state law can begin to recover costs while the plants are under construction. Maryland regulations say that power plant construction costs can be passed through to customers only once the plant is operating.
Sources familiar with the negotiations over the loan guarantee say that the Office of Management and Budget initially calculated that the credit subsidy for Calvert Cliffs was nearly 12 percent, requiring Constellation to put up $880 million. OMB later said that the Constellation venture could lower the subsidy rate to around 5 percent by agreeing to self-insure the project, buy up to 75 percent of the reactor's power and put up an additional $300 million.
EDF said Constellation withdrew "in spite of our repeated efforts to substantially decrease their exposure and risk to the project."
Constellation and EDF, a major shareholder in Constellation, have been quarreling separately over whether Constellation can force EDF to buy several older fossil fuel power plants for $2 billion. EDF said that while the future of the third Calvert Cliffs reactor is unclear, it "remains committed to pursuing new nuclear [power plants] in the U.S."
mufsons@washpost.com
Loan Guarantee Foolishness by the Folks With Green Eyeshades
by Rod Adams http://atomicinsights.blogspot.com/2010/10/loan-guarantee-foolishness-by-folks.html
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