Constellation Energy Group Inc. has pulled out of a government program essential to its plans to build a new nuclear reactor in Maryland, all but killing the project and further straining relations with its French partner, Electricité de France SA. The Baltimore power and utility company said early Saturday it won't move forward with an application for a federal loan guarantee, finding the government's terms "unworkable."
"We no longer see a timely path to reaching a workable set of terms and conditions," Constellation said in a statement.
Constellation has been developing the project planned for its Calvert Cliffsplant in Calvert County, Md., for the past five years through a partnership with state-owned Electricité de France, or EDF. The project has faced a string of challenges, and Constellation's relationship with the French power giant has been souring over a disputed clause in the two companies' joint-venture deal to operate several existing U.S. nuclear plants.
The economics of building multibillion-dollar nuclear reactors have deteriorated with a sharp drop in the price of natural gas–a common power-plant fuel–and a pullback in electricity demand during the recession. Furthermore, nuclear operators aren't currently being compensated for the benefits they provide to curb climate change.
A fight also has developed between Constellation and EDF over whether the French company is required to buy 12 power plants—most of them coal-fired—from Constellation for a total of as much as $2 billion. The disputed requirement is part of the larger deal brokered in 2008 in which Constellation sold nearly half of its nuclear-power business to EDF as a way to avoid bankruptcy during the financial crisis.
EDF called Constellation's announcement disappointing, saying the company had worked hard to reduce the risks Constellation would face from the project.
"Constellation knows that we were at the finish line with the Department of Energy and were making significant progress," EDF said in a statement.
No one at the Department of Energy could be reached immediately for comment.
Constellation said it informed EDF of its withdrawal, but no decision has been made on the future of the Maryland project. Constellation blamed the collapse of the process on costs the federal government planned to impose as part of the guarantee. The guarantee program provides government backing for a project to ensure financing is available and affordable.
So far the Department of Energy has only awarded Southern Co. a roughly $8 billion guarantee for a project in Georgia. Since then, Constellation, NRG Energy Inc. and Scana Corp. have been competing for the remaining guarantee available under the federal program. NRG is planning to build two reactors in Texas, while Scana is planning two reactors in South Carolina.
An NRG spokesman didn't have an immediate comment on how Constellation's decision may affect the company's bid for a loan guarantee. Company executives have said in the past a federal loan guarantee is critical for the project.
A spokesman for Scana said the company continues to pursue a guarantee for its project, but one isn't required for the project to move forward.
