Recognizing the diminished prospects for the South Texas Project (STP) nuclear development plan as a result of the ongoing nuclear incident in Japan, NRG Energy, Inc. (NYSE:NRG) announced it will write down its investment in the development of South Texas Project units 3&4. NRG further announced that, while it will cooperate with and support its current partners and any prospective future partners in attempting to develop STP 3&4 successfully, NRG will not invest additional capital in the STP development effort.
“The tragic nuclear incident in Japan has introduced multiple uncertainties around new nuclear development in the United States which have had the effect of dramatically reducing the probability that STP 3&4 can be successfully developed in a timely fashion,” said David Crane, President and CEO of NRG. “We continue to believe both in the absolute necessity of a US nuclear renaissance and that STP 3&4 is the best new nuclear development project in the country bar none. However, the extraordinary challenges facing US nuclear development in the present circumstance and the very considerable financial resources expended by NRG on the project over the past five years make it impossible for us to justify to our shareholders any further financial participation in the development of the STP project.”
As a result, NRG expects to record a first-quarter 2011 pretax charge of approximately $481 million, for the impairment of all of the net assets of Nuclear Innovation North America (NINA), the Company’s nuclear development joint venture with Toshiba American Nuclear Energy Corp. (TANE). The write down consists of $331 million of NINA net assets funded by NRG along with $150 million of net investment contributed by TANE.
As previously announced last month, NINA suspended indefinitely all detailed engineering work and other pre-construction activities and, as a result, dramatically reduced the project workforce. NINA, going forward, will be focused solely on securing a combined operating license from the NRC and on obtaining a loan guarantee from the US Department of Energy, two assets that are absolutely essential to the success of any future project development. TANE will be responsible for funding ongoing costs to continue the licensing process. In concurrence with the substantial reduction in NINA’s project workforce, and to support NINA’s reduced scope of work, NRG expects to incur one-time costs, related to a contribution to NINA, which are not expected to exceed $20 million. These costs will be incurred, and expensed, primarily in the second quarter 2011.
NRG Energy drops plans for new nuclear reactors at South Texas Project