Partner looks for escape strategy

08 December 2009

There is now serious doubt over San Antonio utility CPS Energy's commitment to expanding the South Texas Project nuclear power plant after it made legal enquiries.


After a postponed a bond issue, a warning on cost escalation, an internal investigation and the departure of its general manager, CPS Energy has now petitioned a court to rule on its obligations under an agreement to expand the plant. CPS's partner in the project is Nuclear Innovation North America, a project company set up by STP joint-owner NRG Energy and Toshiba, which hopes to sell two Advanced Boiling Water Reactors.


The cost of the two large reactors was originally placed at $10 billion, with an extra $3 billion in finance. This estimated figure grew, however, to $14 billion before finance. At around the same time, CPS and NRG both decided to reduce their stakes in the two new units from 40% to 20%. Shortly afterwards CPS's owner, the City of San Antonio, delayed a vote on a bond issue to raise money for the investment and CPS began investigating how knowledge of the price hike moved through the company. CPS and NRG travelled to Japan last month for talks with Toshiba.


CPS's acting general manager, Jelynne LeBlanc-Burley, said yesterday that information from the court would "help us better prepare for the updated cost estimate we expect from Toshiba by 31 December." A company statement said, "the petition specifically requests defining the liability of both parties should either decide to withdraw from the project."


Both CPS and NRG have put millions into developing a plan for the new reactors, including a construction and operating license application that current resides with regulators. That anticipated approval to build would be very a significant asset, if granted as expected in 2012.


CPS will put a proposed plan of action before San Antonio City Council in mid-January next year.


Toshiba co-developed the ABWR with GE and they worked with Hitachi in construction. Both GE-Hitachi (with nuclear businesses now merged) and Toshiba have the right to build ABWRs, but the precise design certified for build in the USA is held by GE-Hitachi. It contains certain proprietary design work, which must be replaced with equivalents and an amendment to the ABWR design certification is currently with the Nuclear Regulatory Commission.