Will Obama's pro-nuclear stance spur Progress Energy's flagging nuke plan in Levy County?
Note: As of Jan. 28 at noon, this has been updated and clarified after communication with Progress Energy.
Wake up and good morning.It came as a surprise to me but was no doubt a positive shock to Progress Energy when President Obama in his State of the Union address called for a resurgence of nuclear power in America. Obama's predecessor, President Bush, was high on nuclear power and offered federal incentives to speed up the process of getting more nuke plants started. But the effort, while prompting 32 new nuke plants to be proposed, became bogged down in industry and regulatory bureaucracy, as well as the recession. ( Photo: Pablo Martinez Monsivais/AP.)
It was during the Bush presidency that Progress Energy, based in Raleigh, N.C. ,and the parent of Progress Energy Florida in St. Petersburg, announced plans to build two nuclear power plants in Levy County, just north of Citrus County where Progress Energy Florida has operated a nuke plant for decades.
Lately, the Levy nuke project (see rendering, right) has fallen under a cloud thanks to the state's deep recession, a slowdown in Florida population growth and questions over any future rate hikes designated to help Progress Energy pre-pay nuclear plant construction costs. (The Florida Public Service Commission denied a hefty rate increase this month sought by Progress Energy but the company reminds me those revenues would not have been used to cover any nuclear plant costs.) The fact that Progress Energy's Crystal River nuke plant in Citrus County sits idle after it was recently found to have a hole in the side of its containment building (not its reactor core) is not helping the power company's ability to portray nuclear power management in a positive light at the moment.
Consider Obama's words Wednesday night during his State of the Union address:
"To create more of these clean energy jobs, we need more production, more efficiency, more incentives. And that means building a new generation of safe, clean nuclear power plants in this country."
That had to be music to the ears of Progress Energy executives (as it was to execs at South Florida's Florida Power & Light, which also seeks to build more nukes in the state). "I like what he (Obama) said about nuclear energy," Sen. George LeMieux of Florida told the New York Times.
The issue for Progress Energy and its nuclear brethren? If they are not assured of future rate increases to help pay for expensive nuclear construction, how will they finance plants like the one proposed in Levy? That's why the Obama remarks are so heartening to the industry. Presumably it means the feds will revive financial incentives to make nuclear power construction more affordable and attractive to electric utilities.
"The White House is supportive of nuclear. We see this as part of the solution. …Right now 20% of our electricity is from nuclear; we would like to maintain that, possibly grow that. For that reason we are working aggressively to help restart the American nuclear industry with loan guarantees with research in the out years that will lead to more advanced, safer nuclear power."
For the moment, Wall Street is down on power companies that have been rebuffed by state rate regulators, like the Florida PSC. The latest blow to Progress Energy comes from a downgrading of the company to "Underperform" by Zacks Equity Research, citing the "disappointing" outcome of the Florida PSC rate decision. Here's what Zacks says:
"Progress Energy is one of the nation's larger pure-play electricity utilities with solid rate base growth opportunity in the long-term. Given the disappointing outcome of the Florida rate case and a lowered 2010 guidance, we expect the stock to remain under pressure in the near term.
"Furthermore, the weak economic conditions in Florida, which have slowed customer growth and reduced demand for electricity, remain worrisome issues. Thus, we expect 2010 to be a challenging year for Progress Energy.
"Accordingly, we downgrade our recommendation to UNDERPERFORM with a target price of $36."
-- Robert Trigaux, Times Business Columnist