Nuclear’s “bet-the-farm” risk —Moody’s

Wonder why Southern Company couldn’t get private financing for its new nukes at Plant Vogtle? Because back in June 2009 bond-rater Moody’s said this:

But from a credit perspective, the risks of building new nuclear generation are hard to ignore, entailing significantly higher business and operating risk profiles, with construction risk, huge capital costs, and continual shifts in national energy policy.

In case that wasn’t clear enough, they spelled it out further.

Nuclear’s “bet-the-farm” risk

The NRC says about 14 companies to date have submitted COL applications, proposing numerous new nuclear reactors for power generation. The first of these COL’s is expected to be approved beginning in mid-2011. Many of the COL license applications include partners, but the next table lists the primary holding company entity behind each project, and our view of the activity level associated with the endeavor.

From a credit perspective, companies that pursue new nuclear generation will take on a higher business and operating risk profile, pressuring credit ratings over the intermediate- to long-term.

Moody’s wraps up with some reassuring words for financiers, but maybe not so reassuring to we the taxpayers:

Even so, we also believe companies will ultimately revise their corporate-finance policies to begin materially strengthening balance sheets and bolstering available liquidity capacity at the start of the construction cycle. In addition, we believe regulators will generally continue to support the long-term financial health of the utilities they regulate, and will authorize recovery of investments and costs over a reasonable timeframe.

In other words, if nuke-building companies can’t get private investors to shoulder the risk, get regulators to socialize the losses by passing them on to taxpayers and customers. That way the nuke-building companies can end up solvent with profits and 62% raises for their CEOs.

What The Southern Company actually did was it got the federal government to guarantee loans at the expense of we the taxpayers, and now it’s trying to get even more special nuke loan terms. And what the Georgia PSC did to “authorize recovery of investments and costs over a reasonable timeframe” was to let Georgia Power go ahead and charge customers Construction Work in Progress (CWIP) for power they won’t receive for years under the best of conditions, while the construction delays have already begun. And Georgia Power customers also get to pay for cost overruns.

Maybe it’s time for we the taxpayers and Georgia Power customers to say we don’t want to pay for nukes through CWIP. We want Georgia Power and its parent the Southern Company to re-evaluate their risk. Then they’ll see coal, natural gas, and especially nuclear are bad business bets, while there’s clean energy independence and profit in joining Austin Energy and Cobb EMC in a solar-powered future.

-jsq