Constellation Energy says loan backstop too costly

AP News
Posted: Oct 10, 2010 4:33 PM
Constellation Energy says loan backstop too costly

Constellation Energy Group Inc. says it won't tap a government program necessary to build a new nuclear plant in Maryland, in a move likely to kill the project, according to a published report on Sunday.

The U.S. Department of Energy's loan guarantee came with "unworkable" terms and an "unreasonably burdensome" cost, Constellation said Saturday, according to a report by The Wall Street Journal.

The Baltimore-based utility said it made several attempts to reach a deal with the Energy Department and the White House's Office of Management and Budget, the newspaper said. Constellation said it could "no longer see a timely path to reaching a workable set of terms and conditions."

The government guarantee was necessary for Constellation to finance the planned Calvert Cliffs 3 plant in Calvert County, Md. Lenders require developers of nuclear sites to obtain the guarantee. The projects are too costly and high-risk to qualify for regular loans.

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The project is being developed by Unistar, a joint venture between Constellation France's Electricite de France SA. The venture grew out of a 2008 deal in which Constellation sold EDF half of its nuclear-power business to avoid bankruptcy, The Wall Street Journal said. It said they have argued over whether the French company must buy 12 power plants from Constellation.

EDF did not immediately respond to requests for comment Sunday.