Constellation CEO: Calvert Cliffs project in jeopardy

Mayo A. Shattuck says uncertainty surrounding conditional approval of loan guarantee impacting prospects for Calvert Cliffs nuclear project

July 28, 2010|By Hanah Cho, The Baltimore Sun

Constellation Energy Group Chief Executive Mayo A. Shattuck warned Wednesday that the proposed new nuclear reactor at Calvert Cliffs would be in jeopardy if the project does not receive approval for a federal loan guarantee by the end of the summer.

Shattuck said the delay for the conditional guarantee, which is considered crucial to financing the nuclear unit, has begun to "affect the prospects for the Calvert Cliffs project." And the wait has prompted the Baltimore company to roll back its spending on the project, Shattuck said, during a conference call announcing its second-quarter earnings.

While Shattuck said Constellation and Electricite de France, the company's partner in the Unistar Nuclear Energy joint venture, are committed to pursuing the project, he warned that time is running out. Executives said they had expected a decision by the U.S. Department of Energy earlier this year.

"We can't keep going at the rate that we're going without clarity on the loan guarantee," he added. "Time is a little bit of our enemy at this point."

Constellation and EDF have spent $600 million on the proposed nuclear reactor in Southern Maryland, and Shattuck said Constellation plans to fund Unistar for the rest of the year. But Unistar has cut back on hiring contractors and supply chain vendors and has stopped filling open positions, he said in an interview.

The reactor's construction is expected to yield about 2,100 jobs in the first year and up to 7,670 overall, according to a study conducted by Areva, the world's largest reactor maker, one of two companies designing and building the proposed reactor for Unistar. The plant is expected to create 400 to 700 permanent jobs.

"I think we've all been geared toward having a decision before this point in time, frankly," Shattuck said. "There is some level of frustration that we haven't had an answer at this point."

At the moment, the Energy Department has only enough loan authority to offer one project a conditional guarantee.

Michael Wallace, chairman of Unistar and vice chairman of Constellation, said Unistar's application is further along in the process than competing projects.

The Maryland project is at the final review stage before the credit board that makes loan guarantee recommendations to the energy secretary, Wallace said.

Ebony Meeks, a spokeswoman for the Department of Energy, said the agency understands Constellation's frustration, but "our main priority is to be a steward of taxpayer dollars."

"These loan guarantees are very complex, and we need to make sure they are reviewed thoroughly," she said.

This year, President Barack Obama announced a conditional loan guarantee for a nuclear project in Georgia, which would be the first project of its kind in decades.

Although there are other variables — including the cost of the project and federal policies affecting carbon prices — that Constellation and EDF will have to consider before making a final decision on the project, Shattuck said the loan guarantee approval is an important milestone.

Meanwhile, Constellation reported that its second-quarter profit rose to $72.6 million, or 36 cents per share, compared with $8.1 million, or 4 cents per share, in the corresponding period last year. Last year's net income was hurt by losses related to shedding some of the company's businesses.

Excluding accounting changes, discontinued operations and other special items, earnings from continuing operations fell to 71 cents per share, down from $1.08 per share in the same period a year earlier.

Constellation's regulated utility, Baltimore Gas and Electric, reported net income of 7 cents per share in the quarter, up from 6 cents per share a year ago.

Constellation shares fell $1.63, or 4.7 percent, to close Wednesday at $33.28.

hanah.cho@baltsun.com

http://twitter.com/hanahcho

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