published Wednesday, August 24th, 2011

TVA to sell nuclear reactor

TVA is trying to sell and lease back the Watts Bar Nuclear Plant Unit 2.
TVA is trying to sell and lease back the Watts Bar Nuclear Plant Unit 2.
Photo by Dan Henry.
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Power plant leasebacks and transfers

* In 1988, El Paso Electric Co. sold and leased back approximately 40 percent of its 15.8 percent interest in Unit 3 of the Palo Verde Nuclear Generating Station for a purchase price of approximately $250 million.

* In 1990, CMS Energy Corp. sold part of its Midland Cogeneration Venture power plant for $2.3 billion.

* In 2005, a subsidiary of First Energy Corp., acquired control of the Beaver Valley Power Station, Davis-Besse Nuclear Power Station, and Perry Nuclear Power Plants from Cleveland Electric Illuminating Company, Ohio Edison Co., Pennsylvania Power Co,, and the Toledo Edison Co.

For the first time in its 78-year history, TVA plans to put a nuclear power reactor on the auction block — all in hopes of raising money to complete another nuclear plant.

With the plan, TVA hopes to sell the new Watts Bar Unit 2 reactor, along with the new John Sevier combined cycle gas plant, to finance the $4.9 billion completion of Bellefonte Nuclear Plant, a 37-year-old, half-finished reactor in Hollywood, Ala.

Kim Greene, TVA group president of strategy and external relations, said Tuesday that the utility expects to raise $900 million to $1 billion for the gas plant and up to $2.5 billion on the sale of the new Watts Bar reactor, which would then be leased back to TVA.

"There have been sale/lease-backs of nuclear units in the past, and I do believe the closer we are to completion of construction, the easier it will be [to sell the reactor]," she said. "At this point, we have indications from the market that there would be an appropriate amount of interest in the Watts Bar Unit 2 facility."

The Watts Bar reactor is expected to be completed in 2013.

But finding a buyer may prove harder than TVA anticipates.

"I support nuclear and want TVA to pursue it, but I don't want to own Watts Bar," said EPB President Harold DePriest, who also is the chairman of the Tennessee Valley Public Power Association and the vice chairman of Seven States Power Corp., a cooperative of TVA power distributors formed in 2007 to pursue joint ventures and shared ownership of the utility's power-generating equipment.

"I have no interest into buying into nuclear," said DePriest, who is one of several distributors who told TVA's board members last week that they should finish Bellefonte as a nuclear plant.

Seven States Power already has agreed to buy and lease back to TVA a combined cycle natural gas plant at TVA's Southaven plant in DeSoto County, Miss., and the distributors could buy other assets from TVA.

"We'll be talking with [TVA] to see what else we may do," DePriest said.

A decade ago, TVA rejected an offer for a lease-back arrangement on the unfinished Bellefonte with Chattanooga developer Franklin Haney. At the time, TVA still was evaluating its options for Bellefonte and wanted to try to finish the plant with its own money, officials said.

Ratepayer concerns

TVA officials have acknowledged the sale/lease-back financing method is likely to be slightly more expensive than if TVA funded the project entirely on its own with bonds.

But TVA's debt -- currently $24 billion -- is approaching a $30 billion cap set by Congress in 1979, so the federal utility may not have much choice if it wants to continue to build multibillion-dollar nuclear plants while adding air pollution controls to old coal plants or replacing other plants with new gas-fired units.

The lease-back is considered an alternate form of financing and does not fall under the debt cap.

Greene said TVA's financial health is good, but "clean air equipment, the combined [natural gas] cycle plant and Bellefonte cost money, and this is where we get into the discussion of how to finance this. We are looking for alternative ways to finance it."

  • photo
    Kim Greene is leaving her TVA position as group president of strategy and external relations to work for Southern Co.

Greene said TVA will not seek competitive bids on its proposed sale and lease-back of the John Sevier plant until the fall. The utility will not seek bids on the new Watts Bar reactor sale and lease arrangement until the spring, she said.

She said TVA hasn't pressed Tennessee's congressional delegation about raising TVA's debt limit, even though the utility is facing Bellefonte's $4.9 billion completion cost, $1.6 billion in new coal plant air scrubbers expenses and the cost of buying the plant in Mississippi.

"Given the situation with the country, this doesn't seem a good time politically" to seek a debt-limit increase, Greene said.

Within minutes of the conclusion of Thursday's TVA board meeting, U.S. Sen. Bob Corker and U.S. Sen. Lamar Alexander, both R-Tenn., went on record commending the board for its vote to complete Bellefonte. On Tuesday, neither would commit to changing TVA's debt limit.

Alexander said he would consider helping TVA navigate alternatives.

"I believe TVA should have financial flexibility to achieve its clean-energy goals, which requires building new nuclear power plants and putting pollution-control equipment on coal plants. If TVA has a better way than the current financial structure to achieve those goals, I will be glad to consider it, especially if it helps keep electric bills lower," Alexander said through spokesman Jim Jeffries.

Corker, too, said he wants to help TVA but would not say specifically if that meant raising the utility's debt limit.

"I'm glad TVA is expanding its nuclear power footprint and am continuing to discuss with them the most prudent ways to finance expansion of clean, reliable base load power while keeping rates in the valley as low as possible," the senator said in a statement released by Corker spokesman Chuck Harper.

TVA Chief Financial Officer John Thomas said Tuesday that TVA's debt limit, had it been raised proportionally with the consumer price index, would now be about $90 billion.

The interest TVA pays is about 11 cents out of every revenue dollar, Thomas said. In 1996, he said, the utility paid about 35 cents from every revenue dollar to cover interest costs.

Compared to eight other peer utilities -- including Duke, Southern and Entergy, all of which must pay interest and dividends -- TVA's debt burden is third lowest.

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about Dave Flessner...

Dave Flessner is the business editor for the Times Free Press. A journalist for 35 years, Dave has been business editor and projects editor for the Chattanooga Times Free Press, city editor for The Chattanooga Times, business and county reporter for the Chattanooga Times, correspondent for the Lansing State Journal and Ingham County News in Michigan, staff writer for the Hastings Daily Tribune in Nebraska, and news director for WCBN-FM in Michigan. Dave, a native ...

about Pam Sohn...

Pam Sohn has been reporting or editing Chattanooga news for 25 years. A Walden’s Ridge native, she began her journalism career with a 10-year stint at the Anniston (Ala.) Star. She came to the Chattanooga Times Free Press in 1999 after working at the Chattanooga Times for 14 years. She has been a city editor, Sunday editor, wire editor, projects team leader and assistant lifestyle editor. As a reporter, she also has covered the police, ...

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GarryMorgan said...

Does this not violate the TVA Act? More irresponsible management on the part of TVA Executives. Would any TVA executive manager survive in civilian industry by suggesting to sell a nuclear plant then build another nuclear plant which will most likely be leased back from the new owner at a higher cost. It is crazy and reflects gross mismanagement on the part of the TVA of our resources.

Lets look at what the current TVA Executives have accomplished, engineering failures at 2 coal fired steam plants, further debt, gross waste and abuse, failure to implement cost savings measures of energy efficiency and clean air technology in their coal fired steam plants which has cost us the ratepayer billions of dollars in legal payments, executives skewered the IRP to support nuclear power, failure to improve their dam fleets efficiency and a continuing mantra of lies in relationship to nuclear power, not an impressive record.

Further evidence of TVA mismanagement involved the abject failure of TVA's Nuclear Oversight Committee in seeking professional opinion and scientific input from the Nuclear Energy Institutes puppets in support of the nuclear industry. Why would anyone expect anything other than approval of nuclear power from those who fully support nuclear power working in the nuclear industry? An example of furthering gross deceit and neglect of the scientific process of evaluation and problem solving.

The TVA did not specifically disclose this latest excuse of ridiculousness in its board meeting last week. At least fire this current cadre of executive manager misfits whose only concern is the support of the nuclear industry.

TVA executive management supported by the TVA Board has demonstrated it supports failure upon failure, massive deceit and debt, unacceptable. Ratepayers and citizens should be screaming about this current executive scheme in support of incompetence and further debt.

Build another nuclear plant and sell one already on line, what is their plan then, lease back the plant they sold costing ratepayers billions of dollars, get rid of the current executive managers of the TVA, CLEAN HOUSE! They are concerned with supporting the multinational nuclear corporations, not the citizens of the Tennessee River Valley.

August 24, 2011 at 12:15 p.m.
harrystatel said...

Barry Goldwater was right 50 years ago. Should have sold TVA then.

August 24, 2011 at 1:30 p.m.
Daddyo62 said...

The TVA debt limit is 30 billion,however the TVA Act specifies that 2 billion must be kept in reserve.So in reality the debt limit is actually 28 billion,so in reality there is not enough left under the 28 billion debt limit to fund the Bellefonte project that was approved by the board last week. This current management of "carpetbaggers" is going to finish off TVA if they are not stopped. The Board of Directors are nothing more than Kilgore's pawns,they have approved everything he has requested of them with very little debate,but thats what happens when you have unqualified people in these positions.This new means of raising capital that corporate is suggesting does not need to be done, every ratepayer in the Valley needs to be contacting their elected officials to express their disapproval of this measure.

August 24, 2011 at 8:18 p.m.
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