Platts - Thursday, July 02, 2009 http://www.platts.com ------------ Exelon would look to sell NRG Energy's Louisiana, overseas plants Washington (Platts)--2Jul2009 Exelon, which earlier on Thursday raised its offer to buy NRG Energy, said it would look to sell the 2,410 MW of capacity NRG owns in Louisiana along with the merchant generator's foreign holdings after the deal closes. The Chicago-based company sweetened its offer for merchant generator NRG Energy by 12.4%, saying it would provide NRG shareholders with 0.545 shares in Exelon for every NRG share they hold. Exelon in October offered 0.485 shares of Exelon for each NRG share, a proposal NRG's board and management rejected as too low. On Thursday, Exelon said its new offer, which represents its "best and final" proposal, would increase the value of the deal by more than $3 billion. Should it complete the deal, Exelon said it would look to sell the NRG assets in a move designed to protect its investment-grade credit rating. In a conference call with analysts, Exelon Chief Operating Officer Christopher Crane said that in addition to assets Exelon earlier said it would divest after acquiring NRG, the company would look to sell the Big Cajun "peaking assets" and NRG's international holdings. An Exelon spokeswoman later said Exelon would look to sell all of NRG's Louisiana assets. According to information on NRG's web site, the company owns in Louisiana the 300-MW Bayou Cove gas-fired plant in Jennings, the 430-MW gas-fired Big Cajun I plant and an 85.8% stake, or 1,495 MW, in the coal-fired Big Cajun II plant, both in New Roads and the 185-MW Sterlington gas-fired plant in Sterlington. NRG also said it owns a nearly 42% stake, or 400 MW of capacity, in a 900-MW coal-fired power plant near Halle, Germany, and a 37.5% stake, or 605 MW in a coal-fired plant in Queensland, Australia. After announcing its takeover bid in October, Exelon said the combined company would sell about 2,400 MW of generating capacity in Texas and another 1,000 MW in the PJM Interconnection to address potential market power concerns. Exelon then said it would sell three power plants in Texas--Mountain Creek, Handley and LaPorte--with a combined generating capacity of about 2,400 MW, and to transfer to a third party Exelon's power purchase agreements in Texas totaling about 1,200 MW of capacity. In addition, the combined company would divest about 1,000 MW in the PJM East market, specifically the Indian River, Vienna and Dover plants that NRG currently owns, Exelon said. In the call with analysts, Exelon Chairman and CEO John Rowe said the enhanced offer would create additional value for NRG shareholders. "Realistically put, the Exelon offer will create as least $2 billion and more likely an additional $3 billion in value for NRG shareholders," Rowe said. He added that Exelon shareholders also should gain "between $1 billion to $3 billion in value" through the transaction. There was no immediate response to the new offer from NRG. Rowe said Exelon was able to boost its offer for NRG for a couple of reasons. To a smaller degree, Exelon views NRG's recent acquisition of Reliant Energy's Texas operations as "positive," he said. But, "To a larger degree, the increased offer is supported by additional cost synergies we have identified through analysis...we believe we can deliver an additional $1 billion in synergies." Among the synergies listed by Exelon officials were combining the trading operations of the two companies into a single floor, eliminating duplication in IT areas, and achieving some economies of scale in nuclear operations, which both companies own. "We expect to realize the full impact of the synergies in 2011," although some benefits should occur next year," Crane said. ------------ UK atomic agency sale expected by October, Dounreay bid planned Manchester (Platts)--2Jul2009 The UK Atomic Energy Authority expects the sale of its commercial arm to be completed by the end of September, chief executive officer Norman Harrison said. Harrison also told delegates at a decommissioning conference July 1 that the UKAEA, a state-owned company that pioneers the development of nuclear energy within the UK, plans to bid for decommissioning work at the Dounreay nuclear plant in Scotland once the government tender is launched later this year. UKAEA Ltd, a wholly-owned subsidiary that provides nuclear decommissioning, waste management and site environmental remediation services, was put up for sale in late March after the government said the business could operate independently and concentrate on growing its operations overseas. The number of interested parties has been reduced from the original applicants to a "fairly long shortlist" of manufacturing companies, with the second phase of bidding expected to start in August, Harrison said. "We've now entered phase two of that transaction," Harrison told delegates at the C5 conference in Manchester, England. "Some of the companies either want to partially buy the company or own it completely. "The final decision on the sale will be made after the restart of Parliament in September." Engineering companies Amec and VT Group are understood to be on the revised shortlist of potential bidders, with the sale expected to raise about GBP50 million ($81.9 million) for the government, according to reports. Harrison said the company offered the winning bidder the potential to be involved in an important part of the growing nuclear decommissioning program in both the UK and overseas. "We've had an enormous amount of interest. We're the only nuclear business in town up for sale at the moment." UKAEA Ltd is currently in charge of shutting certain nuclear sites under contract to the UK's Nuclear Decommissioning Agency. The UKAEA's other activities--not part of UKAEA Ltd--include nuclear fusion research. BID TO DECOMMISSION DOUNREAY Harrison also said the company plans to form an "alliance" with Amec and CH2M Hill in a bid to clean up Scotland's Dounreay nuclear station once the tender is launched later in 2009. The fact that UKAEA already has a contract to scour nuclear waste at the plant puts the group in "pole position" to win the contract to continue the work, Harrison said. "Certainly we will be bidding for Dounreay and our intent, together with our alliance partners, is to bid for other NDA opportunities." Harrison said the potential size of the market to decommission all of the UK's old NDA nuclear reactors was worth up to GBP70 billion to potential contractors. "Clearly there is a very bright commercial future for decommissioning for many years to come, and opportunities for contractors will clearly increase as more and more reactors reach the end of their lifetimes," Harrison said, adding that perhaps the greatest opportunities will arise "once we see a clear picture of how to decommission a Magnox site that can be replicated across the entire fleet." Harrison said the new-build market would also offer contractors opportunities for contractors to help develop decommissioning strategies and licensing applications, as well as advising government on assessing new proposals. "There are a number of opportunities in the new build environment to help power companies and government to develop decommissioning plans." ------------ Legislation supporting nuclear energy advances in Italy London (Platts)--1Jul2009 The reintroduction of nuclear power in Italy moved closer July 1 when proposed legislation successfully went through the lower house, the Chamber of Deputies. The deputies' approval of the bill after some modifications follows its passage through the upper house. The bill includes a package of measures on fiscal consolidation and energy matters, specifically nuclear energy. The bill will now go back to the Senate for final revisions. The government has said it is working toward a target of 25% of energy to be provided by nuclear power by 2030. Italy closed all its nuclear power plants after the 1986 Chernobyl accident. ------------ Exelon postpones plans for new Texas nuclear units Washington (Platts)--1Jul2009 Exelon plans to seek an early site permit from the US Nuclear Regulatory Commission for its proposed Victoria County, Texas, nuclear plant site rather than a combined construction permit-operating license, the company said Tuesday. "The change in licensing strategy allows Exelon to continue with some aspects of site evaluation and approvals while deferring a decision on construction and technology choices for up to 20 years," Exelon said. The company said its decision "was brought about by uncertainties in the domestic economy, the limited availability of federal loan guarantees and related economic considerations." Thomas O'Neill, senior vice president for new business development, said the site "is a good location for a new plant. But today's economic realities compel us to defer any decision on construction for a while." Exelon said it has notified the NRC that it will pursue an ESP instead of submitting a revision to its COL application in September as originally planned. Exelon applied to NRC in September 2008 for a COL to build two reactors at a greenfield site in Victoria County. Later in 2008, Exelon switched from GE Hitachi's Economic Simplified Boiling Water Reactor design to the company's Advanced Boiling Water Reactor, or ABWR. Exelon Chairman and CEO John Rowe said in May that the company would delay or cancel the Victoria County project because it was not among finalists selected by the Department of Energy for the first round of loan guarantees. Rowe has consistently said that, given the high capital cost of the project, DOE loan guarantees would be "imperative" for Exelon to move ahead. The NRC says that, by issuing an ESP, the agency "approves one or more sites for a nuclear power facility, independent of an application for a construction permit or combined license." Adding: "An ESP is valid for 10 to 20 years from the date of issuance, and can be renewed for an additional 10 to 20 years. In reviewing an ESP application, the NRC staff will address site safety issues, environmental protection issues, and plans for coping with emergencies, independent of the review of a specific nuclear plant design." The NRC has issued ESPs to Exelon for its Clinton site in Illinois; to Dominion for its North Anna site in Virginia; and to System Energy Resources Inc. for its Grand Gulf site in Mississippi. The agency is reviewing an ESP application from Southern Nuclear Operating Co. for its Vogtle site in Georgia. --Steven Dolley, steven_dolley@platts.com ------------ NRC safety report on TMI-1 license renewal issued with open items Washington (Platts)--30Jun2009 NRC's safety report on the Three Mile Island-1 license renewal application has been issued with some open items, the agency said in a June 30 statement. Exelon applied in January 2008 to extend the reactor's operating license for 20 years, until April 2034. The NRC's environmental impact evaluation was issued earlier this month. The safety report and the environmental report are the two major reviews undertaken for license renewal requests. The safety evaluation report, which "documents the interim results of the NRC staff's review," shows that Exelon "has identified actions that have been or will be taken to manage the effects of aging in the appropriate safety systems, structures and components of the plant and that their functions will be maintained during the period of extended operation," NRC said. Some open items remain, but the safety report said "the staff did not identify any open items that must be resolved before any final determination is reached by the staff" on the application. The report will be considered by the agency's Advisory Committee on Reactor Safeguards at its September 10 meeting. The NRC said on its web site that it plans to issue its decision on the TMI-1 application in November if there is no hearing, or in July 2010 if a hearing is held. ------------ Ontario government suspends plan to build two nuclear plants Washington (Platts)--29Jun2009 Ontario's government on Monday said it is suspending a request for proposals for two nuclear reactors at Ontario Power Generation's Darlington station, citing concerns about pricing and the future of the lead bidder, Atomic Energy of Canada Ltd. Deputy Premier and Minister of Energy George Smitherman said in a statement that, despite the decision, the government remains committed to modernizing the province's nuclear fleet. "Emission-free nuclear power remains a crucial aspect of Ontario's supply mix," he said. "Unfortunately, the competitive bidding process has not provided Ontario with a suitable option at this time." The government in late February received proposals under the second phase of a two-part solicitation that began in 2008 from Areva, AECL and Westinghouse. It later said only AECL's proposal complied with the terms of the RFP and "the objectives of the government." The Canadian government in late May said it was proceeding with a restructuring of AECL. Under the RFP, the two new units were to replace older units as part of strategy to "renew" Ontario's nuclear fleet, the provincial government said. Nuclear power accounts for about 50% of Ontario's power needs. ------------ State regulators approve new unit at Calvert Cliffs Washington (Platts)--29Jun2009 Maryland regulators gave UniStar Nuclear energy approval to build a US-EPR at the Calvert Cliffs site, according to Constellation Energy. UniStar is a joint venture of Constellation and Electricite de France. The Maryland Public Service Commission issued UniStar a certificate of public convenience and necessity June 29 after completing an 18-month review that included multiple public hearings, Constellation said. The certificate is required before Calvert Cliff-3 can be built. ------------ AmerenUE asks NRC to suspend Callaway new nuclear license review Washington (Platts)--26Jun2009 AmerenUE has asked the US Nuclear Regulatory Commission to suspend its review of the company's July 2008 application for a combined construction permit-operating license to build a new nuclear unit at its Callaway plant in Missouri. In a June 23 letter to NRC released on Friday, Adam Heflin, senior vice president and chief nuclear officer, said "we have determined that it is in AmerenUE's best interests to suspend the review" of the COL application and requested "that the NRC staff suspend all activities" related to the review. AmerenUE announced in April that it was dropping plans to build a 1,600-MW Areva US-EPR reactor at Callaway because the company did not think Missouri state lawmakers would be able to overturn the state's ban on recovering costs on construction work in progress. AmerenUE spokesman Mike Cleary said June 26 that NRC's review of the COL continued after that decision while AmerenUE "looked at its options," but it is now deemed "prudent" to suspend the review. AmerenUE is continuing to review options for recovering some of its investment to date, including "potential transfer of the license application" and sale of its place in line with vendors of certain long-lead components, Cleary said. --Steven Dolley, steven_dolley@platts.com ------------ US NRC sees no environmental problems with TMI-1 license renewal Washington (Platts)--26Jun2009 There are no environmental impacts that would preclude renewing for another 20 years the operating license of Exelon's Three Mile Island-1 nuclear unit in Pennsylvania, US Nuclear Regulatory Commission staff said Friday in a final environmental impact statement. Exelon in January 2008 submitted to the NRC an application seeking to extend the plant's current operating license for 20 years beyond April 19, 2014. Under NRC regulations, the original operating license for a nuclear power plant has a term of 40 years. The license may be renewed for up to an additional 20 years if NRC requirements are met. As part of its environmental review of the application, the NRC said it held public meetings near the plant to discuss the review process and the draft version of the environmental impact statement. Comments were received and considered from members of the public, local officials and representatives of state and federal agencies. NRC's Advisory Committee on Reactor Safeguards will evaluate staff's safety evaluation report in September, the agency said. The ACRS will then make a recommendation to the commission before the agency makes a final decision. ------------ Three Mile Island-1 moves closer to license renewal approval Washington (Platts)--26Jun2009 No environmental impacts preclude license renewal for Exelon's Three Mile Island-1 in Pennsylvania, NRC said in a June 26 statement. Exelon applied in January 2008 for a 20-year extension of the reactor's operating license until April 2034. The environmental impact evaluation is one of two major reviews undertaken for license renewal requests. The other major review, NRC staff's safety evaluation report on the application, will be considered by the agency's Advisory Committee on Reactor Safeguards at its September meeting. The NRC said on its web site that it plans to issue its decision on the TMI-1 application in November if there is no hearing, or in July 2010 if a hearing is held. ------------