EDF's role in US nuclear market is clouded

30th December 2010, Comments 0 comments

Time may be running out for French energy giant EDF to gain a stronger foothold in the US nuclear sector, after it rejected a government loan deal for a new reactor and lost its local partner.

Since parting ways with US firm Constellation in October, EDF has vowed to find a new partner for its American subsidiary Unistar, and to press ahead with construction of a new reactor at Calvert Cliffs, Maryland.

But according to several sources familiar with the situation, EDF has missed a golden opportunity by refusing the 7.5 billion dollar loan guarantee from the Department of Energy (DoE) to help build the reactor.

The DoE "had offered a term sheet to Unistar and they didn't like the terms," according to an administration source.

The French group must find a new local partner because US law requires that firms operating nuclear reactors must be majority US-owned.

A spokeswoman for EDF insisted that the group was still "actively engaged with the DoE" to push the project forward.

But sources close to the case say EDF faces an uphill struggle.

"EDF has said it wants to search for a new partner, but in not accepting this loan guarantee, it deprives itself of financing for the project -- its main guarantee of finding a partner," said one source.

The pitch has also been tilted against EDF since Republicans' victory at recent parliamentary and legislative elections.

According to several US sources, officials are now under increasing political pressure not to offer any financing facility to EDF, also known as Electricite de France.

But officially the government remains "optimistic" about the outcome of the discussions.

Maryland Democratic Representative Steny Hoyer remains "very engaged" with the project, according to his office, which added that the congressman sees a "strong commitment" from EDF to build the reactor in his district.

But a US government official indicated that good will toward the French group is eroding and time is short to rekindle it.

A recent attempt to extend loan guarantees to support US nuclear power projects has just failed in Congress.

Some 18.5 billion dollars remains budgeted for nuclear projects. The state has already allocated 8.3 billion dollars to a Japanese-American project in Georgia and funding for just one other reactor is expected.

On that count EDF faces strong competition from US producer NRG, which is proposing a Toshiba-built reactor in Texas.

But according to one source, the Obama administration would prefer the loan guarantee to go to the Calvert Cliffs project in Maryland, which is a Democratic state, rather than to NRG's project in largely Republican Texas.

According to the same source the DoE would also prefer the money go to EDF to avoid the risk of making the US nuclear sector over-reliant on Japanese technology.

That could be a crucial issue as the United States looks to replace around 100 existing reactors beginning around 2020.

But the longer the EDF process draws out, the more it is likely to be tied up by political and economic constraints, beyond the overarching debate about the future of US nuclear energy.

© 2010 AFP

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