WILL HANEY BUY BELLEFONTE NEXT WEEK?
TVA WRITES OFF LAST $764 MILLION DEBT ON NUCLEAR PLANT
Nearly a half century after starting to build a pair of nuclear reactors in Hollywood, Alabama, the Tennessee Valley Authority is moving to close the book at its costly, unfinished venture. The next chapter for what has become Alabama’s longest construction projects may be decided next month by a former Chattanooga developer trying to become the first individual in the world to own a commercial nuclear plant.
TVA announced last week it has written off the last $764 million of debt on its Bellefonte Nuclear Power Plant, where TVA invested billions of dollars in construction expenses, interest payments and other expenses before scrapping the project. Next week, TVA hopes to complete the sale of the 1,300-acre riverfront site and its power assets to Franklin Haney’s Nuclear Development LLC.
TVA President Bill Johnson said writing off the debt and working to sell the Bellefonte assets are not necessarily related. TVA agreed to accelerate its depreciation of the Bellefonte debt after TVA achieved record operating income during fiscal 2018 and was well positioned to take some of its profits to clean up its balance sheet, Johnson said.
“We have now removed a significant expense that our customers would have have to pay in the future and that will be good for us and our customers, but it had nothing to do with our current activities for the sale of the property,” Johnson said.
The pending sale to Haney for Bellefonte comes two years after Haney was the highest bidder for the abandoned nuclear plant during a public auction by TVA in November 2016. Johnson said he agreed to extend the original 2-year agreement to close the $111 million sale of Bellefonte to Haney for another couple of weeks “because it seemed like the right thing to do,” especially since Haney already put up an initial $22 million for the property two years ago.
Asked if the sale will close by Nov. 30, Haney said the money is in the bank but he is waiting on some legal and regulatory issues.
“We’ve been working day and night on this project for two years because it has such a great potential to create thousands of jobs in the Valley and produce power at an attractive price,” Haney said. “We have been working well with TVA and we appreciate their willingness to extend this for a few more days.”
Johnson, who decided three years ago to abandon the unfinished nuclear plant because there is not enough demand for its power and it is too risky, was coy about what he thinks will happen at Bellefonte.
“I’m not inclined to discuss commercial terms outside the transaction, but we did grant a short extension (for Haney to complete the purchase) and we’ll see what happens from there,” Johnson said last week.
TVA began building Bellefonte in 1975 but suspended construction in 1988 when the growth in TVA power demand slowed and the cost of completing the reactors increased after new nuclear regulations were adopted after the accident at Three Mile Island. At one point, TVA estimated that Unit 1 at Bellefonte was nearly 90 percent complete and the second reactor was more than 50 percent complete. But equipment and regulatory changes since then will require considerable additional work to get the plant finished and licensed by the U.S. Nuclear Regulatory Commission.
TVA briefly considered the Bellefonte plant for the next generation of Westinghouse AP1000 reactors, but later scrapped those plans as well. TVA has maintained the construction permits for both reactors at Bellefonte, which the NRC would have to approve to be transferred to Nuclear Development LLC.
Johnson, who is preparing to retire from the utility industry after heading TVA for six years and previously working at Duke Energy and Progress Energy for two decades, is cautious about building any new nuclear power plants given the time and cost needed to build such units in an era of changing technologies and stable or even falling power demand.
“The lesson of Bellefonte is a lesson we’ve learned many times in the industry, which is to be leery of your demand forecast and be careful what kind of projects you undertake,” he said. “There is no new learning in that, but there is continuous learning in that.”
The two Babcock and Wilcox reactors at the Belefonte plant were among 17 reactors TVA proposed building in the 1970s to meet future power demand, which at the time was projected to grow at more than 7 percent annual growth pace and double every 12 to 15 years. Power demand has since stagnated — and even declined in some recent years — and TVA doesn’t project any need for more baseload generation like what a nuclear plant would produce for at least the next 20 years.
But with Bellefonte already at least half built and the site licensed and prepared with cooling towers, switch yards, offices and warehouses, in addition to the reactor buildings, Haney believes that Bellefonte could be completed for a fraction of the cost of building a new nuclear plant and sell power on the grid at an attractive price.
The 74-year-old developer is so confident that he says he is personally funding most of the cost and work on Bellefonte so far, including more than $30 million spent to pay TVA to maintain the Bellefonte assets over the past two years and to hire engineering firms and consultants to study how the two reactors could be completed.
Haney hired former TVA Nuclear Chief Preston Swafford and former TVA Chief Operating Officer Bill McCollum to help oversee the assessment and work plan to finish the plant and market its power. Haney’s Nuclear Development LLC has also hired the Montreal, Canada-based SNC Lavalin to work on preparing plans to finish Bellefonte and has signed a letter of intent with SNC Lavalin Nuclear USA, a newly created subsidiary, to provide engineering, procurement and construction management services to complete Bellefonte Unit 1.
Nuclear Development LLC is trying to arrange financing and secure customers for the 2,400 megawatts of electricity that the twin-reactor plant would be capable of generating if both units are completed. In 2014, Haney secured $2.3 billion of federal tax credits allocated for new nuclear power plants and he is working to secure up to $5 billion in federal loan guarantees from the U.S. Department of Energy.
Nuclear Development is seeking to negotiate a sales agreement with Memphis Light, Gas and Water to sell Bellefonte power to the Memphis utility. But the city-owned distributor of TVA has not inked any final deal and, at least for now, seems reluctant to make any firm commitment to leave TVA and contract to buy power from a yet-to-be-built plant.
Anti-nuclear groups question whether a plant like Bellefonte that has been under construction, mothballed and even partially dismantled over the past 44 years could still be finished.
“The Quality Assurance was lost when the Bellefonte Reactors were scrapped, cannibalized approximately 12 years ago,” said Garry Morgan, a Scottsboro, Alabama leader in the Bellefonte Efficiency and Sustainability Team (BEST) which has fought for decades against finishing Bellefonte. “Without quality assurance the nuclear reactors cannot be licensed to operate.”
But many political leaders in North Alabama who have witnessed the roller coaster of ups and downs at Bellefonte over four decades are still eager to have Haney finish the plant.
“My motivation is strengthening of America’s power grid so we have more sources of electricity and with that additional supply, more competition that will hopefully force electricity prices to be lowered,” said U.S. Rep. Mo Brooks, the Alabama Republican who has written DOE in support of federal loan guarantees for Nuclear Development to finish Bellefonte. “Motivation No. 2 is over 1,000 jobs averaging over $100,000 per employee.”
Brooks said he is “all for Bellefonte being completed, power being generated and Jackson County enjoying a wealth of high-paying jobs.”
Contact Dave Flessner at dflessner@timesfree press.com or at 757-6340.