Plant closures do not 'signal problems' for US nuclear fleet: S&P

Washington (Platts)--4Sep2013/330 pm EDT/1930 GMT


The permanent closure of five US nuclear power reactors so far in 2013 does "not have widespread implications for the US nuclear fleet, nor do they signal problems endemic to the sector," a Standard & Poor's analyst said in a report released Wednesday.

"In our view, the circumstances [leading to the plants' closures] are unique to each affected facility," David Boden, a credit analyst with S&P, said in the report. S&P, like Platts, is a McGraw Hill Financial company.

This year, Duke Energy has announced the closure of Crystal River-3 in Florida, Dominion Power has shut Kewaunee in Wisconsin, Southern California Edison's San Onofre -1 and -2 in California will not reopen; and Entergy Nuclear will start shutting Vermont Yankee in Vermont. The operators have given a variety of reasons for closing the reactors.

Noting that those five reactors are owned by investor-owned utilities, Boden said in the report that, by contrast, "public power and cooperative utilities rarely exclusively own their nuclear capacity; typically, but not universally, they co-own it with others, most often seasoned nuclear operators. We believe shared ownership and partnering with an accomplished operator mitigates risk."

However, he said, "although we do not believe the cited plant retirements indicate greater credit risk for public power and cooperative utilities with nuclear assets, we believe that certain risks are inherent to nuclear development and ownership. The construction delays that each of the five new plants in development are experiencing, and the operating problems at the Omaha Public Power District's Fort Calhoun Station, bear this out."

Four new power reactors are under construction in Georgia and South Carolina at Vogtle and Summer, respectively, and the Tennessee Valley Authority is completing construction of Watts Bar-2 in Tennessee.

"The output of the nuclear units under construction is either captive or under contract; these will not be merchant plants. Therefore, we do not believe the economic problems that scuttled the Vermont Yankee and Kewaunee nuclear plants are relevant for the new crop of plants," Boden said.

"However, low natural gas prices have stifled interest in developing additional nuclear capacity beyond the plants already in development, at least for now," he said.

"Standard & Poor's believes that limited interest in additional nuclear plants, or even some additional retirements of merchant capacity will not hurt the credit quality of not-for-profit utilities that can recover their nuclear investments' cost from their consumers," he said.

Low power prices and natural gas prices were cited as among the reasons for the decisions to close Kewaunee and Vermont Yankee. The San Onofre units had been shut since January 2012 due to excessive wear on replacement steam generators. Crystal River-3 had been offline since September 2009 as a result of damage to the containment during steam generator replacement work. Efforts to repair the containment failed, causing more widespread damage, and Duke concluded the financial risks of a more extensive repair outweighed the potential benefits.

--Steven Dolley, steven.dolley@platts.com
--Edited by Keiron Greenhalgh, keiron.greenhalgh@platts.com

 

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