Speaking of Corporate Welfare- Luminant Hopes Again To Get Government Loan Guarantees for Comanche PeakSomervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas


 

Speaking of Corporate Welfare- Luminant Hopes Again To Get Government Loan Guarantees for Comanche Peak
 


4 February 2010 at 4:22:57 PM
salon

From the Star-Telegram

A proposed two-reactor expansion of the Comanche Peak nuclear power plant could get a big push as a result of President Barack Obama's call to nearly triple federal loan guarantees for new nuclear reactors to $54.5 billion.

Because, yah know, even though EFH OWNS the dang thing, they Can't Get The Nuclear Reactors Built without government handouts through loans.

If the NRG project is scrapped, that could also enhance the prospects of a loan guarantee for Luminant's Comanche Peak, 45 miles southwest of Fort Worth near Glen Rose. While Luminant failed to make the Energy Department's top-four list, it was notified last year "that we held the first alternate position for a loan guarantee," Luminant spokeswoman Ashley Monts said Wednesday.

John Young, CEO of Dallas-based Energy Future Holdings, Luminant's parent, has previously said financing for the Comanche Peak expansion could be extremely difficult to obtain without a federal loan guarantee. The company, the former TXU Corp., is already saddled with enormous debt, which stood at $43.4 billion as of Sept. 30.

But how great for them that WE would be on the hook for risky loans. I thought this was interesting.

Luminant has estimated that the expansion might cost $15 billion, while emphasizing that the final price tag is uncertain.

Don't you love it? Let's just remember why we think that these loans are risky.

With extremely high capital costs, significant technology risks, and private investors leery--even when times were good--nuclear power arguably stands to gain more from federally backed loan guarantees than any other energy sector. The nuclear energy industry is well aware of the benefits of loan guarantees; applications from the industry total $122 billion.

For taxpayers, this could easily spell financial disaster. The Congressional Budget Office considers the risk of default on the part of the nuclear industry to be very high--well above 50 percent--and payments for defaults would come directly from the U.S. Treasury, in other words, the U.S. taxpayer. Additionally, loan guarantees issued under the Energy Department program carry an extremely high risk because they can cover the entire value of a loan worth up to 80 percent of a project's total cost--terms far better than any private lender would provide. Consider that cost estimates for new nuclear reactors have risen to at least $7 billion each, and it becomes apparent how serious it would be if these companies default.

Such industry-wide defaults have unfortunately happened before, and the U.S. taxpayer was left holding the bag. In the late 1970s and early 1980s, the Energy Department rushed to offer billions of dollars in loan guarantees to help companies develop synthetic fuels. When administrative failures and market changes caused those companies to fail and default on their loans, taxpayers were forced to pay up.

In addition, although the loan-guarantee program is purported to be self-financing, with industry paying so-called subsidy costs to cover the government's long-term liabilities associated with the program, the Congressional Budget Office projects that Energy will likely underestimate those costs. Furthermore, the Government Accountability Office has stated that appropriations will be necessary to cover the operational and administrative expenses of the program because collected fees will likely be insufficient.

The reality is that loan guarantees are extremely risky--especially when dealing with megaprojects such as nuclear power plants where the true final costs are unknown. These same factors also make loan guarantees attractive to lawmakers because they look like a source of free money: Buy a reactor now, pay for potential defaults later.


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Comments!  
1 - humanbeing   4 Feb 2010 @ 6:09:50 PM 

Why don't we all just refuse to pay taxes for awhile and see what happens?


Latest Blog Post by humanbeing -State Department Admits It Doesn't Know Keystone XL's Exact Route
2 - pstern   4 Feb 2010 @ 7:07:09 PM 

Because:

 

  • It's illegal
  • Interest rates will be astronomical on non-payment of taxes
  • You may lose your home
  • There may be liens placed on your wages, or,
  • They can just take it from your wages
  • There could be jail time for doing so.

Latest Blog Post by pstern -Who funds ISIS?
3 - humanbeing   4 Feb 2010 @ 9:04:09 PM 

Aw, shucks!


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