Texas nuclear project to go ahead without Austin

By Bernie Woodall

LOS ANGELES, Feb 12 (Reuters) - Plans are still on track for the $10 billion addition of two nuclear units to the existing South Texas Project after Thursday's decision by Austin, Texas, not to participate, said NRG Energy, one of the two remaining players.

Austin's decision was made official by its city council on Thursday, but was long expected.

Austin Energy, the city-owned utility, does not need the additional power and it presented too much financial risk, the city said in a press statement.

A spokesman for NRG Energy Inc, which is now 50-50 partners for the new units along with CPS Energy, the San Antonio municipal power utility, said Austin's decision will not deter plans.

Austin and its power utility would have to spend $2 billion or more over the next seven years without the power to control costs and plans for the construction of the Texas Gulf Coast nuclear power complex, the city said in its statement.

"A detailed risk assessment and financial analysis indicates that the potential return to (Austin) would not be sufficient given the potential risk," the city of Austin said.

Austin's city council also said that it will not need the addition of 432 megawatts of electricity by 2020, which would have been its share of the new units' output. The city was also concerned about the risk of dealing with additional nuclear waste, it said.

Austin owns 16 percent of the existing South Texas Project (Unit 1 and Unit 2) with a capacity to make 2,560 megawatts of electricity, enough to serve about 1.3 million Texas households.

The other owners of Units 1 and 2 are NRG Energy Inc (44 percent) and the CPS Energy (40 percent).

The ownership arrangements for Units 1 and 2 are not changed.

NRG Energy and CPS Energy seek a partner or partners to take 20-percent equity interest of Units 3 and 4, each of which would be able to make 1,350 megawatts of electricity.

NRG and CPS are looking for one or more owners for up to 20 percent of Units 3 and 4. If a partner or partners are found for 20 percent of Units 3 and 4, then NRG and CPS would each take 40 percent, said David Knox, NRG spokesman.

No matter how much -- or none -- of the ownership is taken by new partners, CPS and NRG will equally split the majority ownership, NRG said.

"We're ready to go on with 50-50 with CPS Energy," Knox said.

South Texas Project is about 10 miles from the Gulf Coast. It is also 12 miles from Bay City in Matagorda County, about 90 miles (145 km) southwest of Houston.

The move by Austin comes on the same day that NRG announced that it has completed engineering, procurement and construction agreements with Toshiba Corp

NRG (88 percent owner) and Toshiba (12 percent) have formed an entity called Nuclear Innovation North America LLC (NINA) to develop Toshiba-built "advanced boiling water reactors" (ABWR). ABWRs are planned for the expanded South Texas Project.

The NRG-Toshiba entity will enter into a $500-million line of credit with Toshiba to finance the cost and materials for the South Texas Project ahead of a "full notice to proceed" declaration. That means when all permits are in hand an construction can begin.

The permits from federal and state officials are expected to be in hand by 2012, and construction of the first unit would follow in about four years, Knox said.

(Editing by Christian Wiessner)

((bernie.woodall@thomsonreuters.com; +1 213-955-6752; Reuters Messaging: bernie.woodall.reuters.com@reuters.net)) Keywords: NRG TOSHIBA/NUCLEAR

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