Constellation Energy cuts spending on Areva reactor venture

Constellation Energy Group has cut spending on UniStar Nuclear Energy, its joint venture seeking to build an Areva-designed nuclear reactor in Maryland.

Chief Executive Officer Mayo Shattuck said in a conference call Wednesday that Constellation cannot move forward on the project without a loan guarantee from the U.S. Department of Energy. The process of getting that financing assistance has taken longer than expected.

“We remain interested and focused on pursuing this project. However, time is running out,” Shattuck said after telling investors and analysts about second quarter profits. “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.”

UniStar is a partnership between Constellation and Electricité de France. They have planned to build an Areva U.S. Evolutionary Power Reactor at the Calvert Cliffs power plant in Maryland.

Two years ago, Areva announced a $25 million, 500-employee expansion in Lynchburg partly because the company needed more engineers to design plans specific to Constellation’s power plant.

The Calvert Cliffs project “is very important to the region as it will provide thousands of construction, engineering, service, and manufacturing jobs for the next decade,” Areva Inc. Chief Operating Officer Mike Rencheck said in a written statement Wednesday.

He said Areva is confident that new nuclear plants will be built in the U.S., and Constellation and Electricité de France are valued partners for Areva.

In Wednesday’s conference call, Shattuck said that many factors in the electricity market make a nuclear plant an uncertain investment. Natural gas prices have fallen in the past four years, and it is unclear when or how U.S. policy on carbon emissions could affect the price of coal-powered electricity, he said.

“At the same time, due to the global push for new nuclear, construction costs have not fallen at the same pace as fuel and power prices,” Shattuck said.

He said the company needs a federal loan guarantee to mitigate the risk of building a new nuclear reactor that could cost billions of dollars. Loan guarantees help a project get a loan because the federal government promises to make the lender whole if the borrower defaults.

Congress has authorized DOE to offer up to $18.5 billion in loan guarantees. About $8 billion of that has been offered for two reactors at a plant in Georgia. The remaining money could provide loan guarantees for one more reactor, said DOE spokeswoman Ebony Meeks.

Three projects, including Constellation’s project with UniStar, are in line to receive loan guarantees.

“We have not yet made any decision … about who is going to be next,” Meeks said. “We hope to make one soon, but we haven’t made a decision.”

Shattuck said Constellation has cut its spending on UniStar, but it will continue working with Electricité de France. The companies would decide together whether to proceed and build a new reactor at Calvert Cliffs.