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Federal loan guarantee offer for Vogtle expansion extended again

Wednesday, July 3, 2013 4:50 PM
Last updated Thursday, July 4, 2013 2:41 AM
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The owners of Plant Vogtle have secured – for the third time – an extension to allow further negotiation with the U.S. Energy Department over its 2010 offer of up to $8.3 billion in federal loan guarantees to help finance two new nuclear reactors.

Georgia Power and co-owners Oglethorpe Power and Municipal Electric Authority of Georgia were conditionally approved in February 2010 for loan-guarantee financing, in which the government promises to assume a company’s debt if the company defaults. However, the details were never agreed on.

Two extensions have since expired, with the most recent deadline – June 30 – passing without any formal agreement in place.

Jeannice M.W. Hall, a Southern Co. spokeswoman, said in an e-mail Wednesday that the new extension sets a Sept. 30 deadline for completing the loan guarantee arrangements.

“There continues to be constructive dialogue in the Vogtle 3 and 4 loan guarantee negotiations between the company and the Department of Energy, and we are cautiously optimistic as we work with the DOE,” she said.

Details of the ongoing negotiations, however, are confidential.

“Loan guarantees were developed to provide an incentive for new nuclear development in the U.S.,” Hall said. “We are committed to financing options that will serve the best interests of our customers, and – as long as the terms and conditions of DOE loan guarantees serve those interests – we will continue to pursue that option.”

Critics of the federal loan guarantee program include the nonpartisan watchdog group Taxpayers for Common Sense, which claimed in a report this week that such deals expose taxpayers to financial risk.

“This whole thing has the stink of another Solyndra-like goose egg for American taxpayers,” said Ryan Alexander, the group’s president.

The nuclear expansion has made progress but has also generated lawsuits, delays and cost overruns that Alexander believes will continue to emerge, possibly adding billions of dollars to its original cost estimate.

The government’s $8.3 billion offer included up to $3.46 billion for Georgia Power, which owns a 45.7 percent stake in the project; up to $3.05 billion for Oglethorpe, which owns 30 percent; and up to $1.8 billion for MEAG, which owns 22.7 percent.

The project’s remaining 1.6 percent is owned by Dalton Utilities.

The new Westinghouse AP-1000 reactors under construction at the Burke County site are scheduled to go online in 2017 and 2018.

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Little Lamb
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Little Lamb 07/03/13 - 10:27 pm
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Goose Gander

Okay, who is guaranteeing what?

Are taxpayers guaranteeing bondholders return of their money if Vogtle owners default on those bonds?

Are Vogtle owners guaranteed exoneration of their obligations if things cost more than the owners estimated?

Why is the Obama administration involved in this? Campaign contributions, as was the case in Solyndra and two dozen other scandals?

corgimom
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corgimom 07/04/13 - 07:36 am
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LL, nuclear projects cost so

LL, nuclear projects cost so much money and take so terribly long to complete, that many power companies don't want to do them. It is very difficult to meet all the NRC requirements. They represent a huge investment of people, and it's very risky for a power company to build one.

Duke Energy nearly went broke back in the 70's when they built theirs.

The problem is cash flow. All the contractors have to be paid immediately, but it takes at least 10 years to get it built and running. The interest costs are so enormous, and it decimates a company.

But yet they are needed. We, as a nation, need them.

So that's why the government has this loan program. Yes, there is some risk, but there is very little risk. As loan programs go, there is very little chance of total default. You might have a delayed payment here and there, if they are temporarily short on cash, but they are going to get it built. They'll pay it back. A power company isn't going to go anywhere.

Power usage is heavily dependent on weather, and you can't predict the weather. Just as you've had unexpectedly big or small bills because of a hot or cold spell, that happens for them, too. So they never know what their future revenue will be.

No region can grow unless there is an adequate power and water supply. Those two things are critical to any area.

If you want an economically healthy area, you have to have an abundant supply of both.

And since the population of the US is growing, you have to increase capacity. I've lived through the rolling blackouts in California, and they are no fun. They present an enormous problem to businesses.

Little Lamb
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Little Lamb 07/04/13 - 10:55 am
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Better Idea

Instead of federal government loan guarantees, how about this:

Owners of Vogtle 3&4 should issue 15-year bonds, scheduled to pay 4% interest to construct and start up the plants. About 8 to 10 billion dollars should cover it. The Federal Reserve Bank prints about 8 to 10 billion dollars out of thin air and buys up all the bonds. If construction goes off without a hitch, then the government gets paid back with interest and all is well. If the project goes belly up, well the money was printed out of thin air anyway, so nobody really pays and all is well.

Isn't that simpler than loan guarantees?

Lunaville
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Lunaville 07/05/13 - 09:14 am
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Fukushima

Vogtle is a homegrown Fukushima waiting to happen. Meanwhile, much of our coast is likely extremely suitable for wind energy. Most of central and south Georgia looks like G-d designed it with Solar Farms in mind. Georgia Power is charging citizens to build a nuclear power plant that is unwanted with the assistance of federal loan guarantees further putting taxpayers on the hook for any mishap. The 20 year plan Georgia Power just submitted to the PSC includes a measly 210 megawatts produced via Solar Energy.
I'd like to accuse Georgia Power executives of being greedy, but the evidence indicates they don't even have enough sense to be greedy. Solar farms are cheaper to build than nuclear plants, they are cheaper to maintain, they sure as hell have lower liability costs, they would have to be cheaper to insure, and there is no costly waste to store. Simple, logical, greed would dictate that almost every open field and roof in Georgia was covered with solar panels or film.
It's a sad day when a corporations' decisions can make me feel nostalgic for greed.

JimHopf
15
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JimHopf 07/05/13 - 04:39 pm
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These loan guarantees are far

These loan guarantees are far less risky than Solyndra, as they are to established regional (regulated monopoly) utilities. In other words, Southern Co, isn't going anywhere, whereas Solyndra was a small start up company that could close its doors at any time. Also, these utilities will be forced to pay the govt. a large cash payment to compensate it for its risk (kind of like having to pay for mortgage insurance). For renewables, the loan terms were more generous (no surprise) and Solyndra simply didn't have to make such a payment. Never would have been able to.

The reason why such clean energy loan guarantees, or any clean energy subsidies, are necessary is that congress (i.e., the Republicans) have shot down all other means for supporting clean energy, or more to the point, making dirty sources account for their enormous health and environmental costs. Regulations (limiting air pollution or CO2)?, no way!! Cap-and-Trade, no way!! A tax on CO2 (or other air pollutants)? You gotta be kidding!! Subsidies for certain clean sources are the only policies that seem to get support, even though subsidies are inferior policy, vs. the other options above. I thought Republicans agreed with the idea of market solutions (i.e., cap-and-trade or a CO2 tax).

In any event, it's moot because the loan guarantees STILL haven't been granted, and it appears that these nuclear projects are going ahead without them (something that those renewable projects would NEVER do). Thus, nuclear apparently doesn't "need" these loans.

Lunaville's assertions about solar and wind are completely wrong, especially for the Southeast. The onshore wind resource in the SE is awful, and offshore wind is prohibitively expensive (several times nuclear). Solar is also several times more expensive (per kW-hr) than nuclear. These utilities demonstrated to the PUC that nuclear was the cheapest option (even cheaper than gas, over the long term). And it appears that the projects are staying close to budget.

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