Report: Solyndra-Style Problems Seen in $8.33 Billion Federal Loan Guarantee for Vogtle Nuclear Reactor Project

 Report: Solyndra-Style Problems Seen in $8.33 Billion Federal Loan Guarantee
                      for Vogtle Nuclear Reactor Project

PR Newswire

ATLANTA, Jan. 30, 2013

FOIA-Disclosed Documents Expose Inadequate Attention to High Risk Faced by
Taxpayers, Problems with Loan Due Diligence and Apparent Political

ATLANTA, Jan. 30, 2013 /PRNewswire-USNewswire/ -- Documents newly acquired
under a Freedom of Information Act (FOIA) request and subsequent litigation
show that Solyndra-like problems are plaguing the controversial $8.33 billion
federal loan guarantee conditionally committed for the construction of two
nuclear reactors (Vogtle 3 and 4) in Georgia, according to a new analysis by
Synapse Energy Economics and Earth Track for the Southern Alliance for Clean
Energy (SACE).

Available at, the new report and related memo are
based on hundreds of Department Energy (DOE) documents dated between June 2008
and July 2012. The analysis provides extensive new information about problems
with the handling of the loan guarantee process for the Vogtle Project, the
adequacy of the financial terms for the federal loan guarantees, risks to
taxpayers not fully addressed in DOE's credit subsidy analysis, and
indications of political interference with key financial decisions related to
the conditional loan guarantees.

Among the key findings:

  oRepeated indications of involvement in the loan guarantee process and
    terms by political appointees.An e-mail from December 2010 points to
    unspecified communication between the White House and the Nuclear Energy
    Institute over issues of concern. (In this and other cases, extensive
    redactions in the FOIA documents make the precise focus of the meetings
    and discussion unclear.) An email from February 2010 notes that DOE did
    not "deal" with Shaw [the firm slated to do much of the reactor
    construction]; rather, "the [W]hite [H]ouse did."Efforts for DOE to close
    out consultation, most likely on loan terms, was handled "at the political
    level" of the Department of the Treasury, according to another email.
    Emails from DOE staff indicate that Secretary Chu was involved in
    discussions with key Vogtle Project players over loans details as
    well."MEAG's CEO, Bob Johnston got a call on Friday from Secretary Chu
    and they discussed the progress that had been made with Southern and where
    we stood on our [the MEAG] term sheet negotiation," read one email.As the
    report notes: "Those discussions were generally with the top management
    of the companies. This is a potentially troubling blurring of financial
    risk review, political discussion, and potential modification of loan
  oCredit subsidy payments that appear too low to offer adequate protection
    to taxpayers in the event of a default. According to the report: "Even the
    high estimate for Georgia Power ($52 million), for example, would add only
    about 1/8% to borrowing costs over the life of the loan. This increment,
    which is supposed to protect taxpayers from the risk of default on the
    first nuclear reactors built in the U.S. in 30 years, is likely less than
    the Federal Financing Bank (FFB) markup on the loan relative to the
    Department of the Treasury's base cost of borrowing." The uncensored
    documents also reveal that the other major utility partners were offered a
    conditional loan guarantee with substantially higher credit subsidy fees
    than Georgia Power, but were still not protective of taxpayers. Oglethorpe
    Power's fee was 2.5-4.3% for a range of $70-132 million and MEAG's fee was
    5-11.1% for a range of $108-186 million.
  oStale credit subsidy values.  Despite continuing changes to the loan terms
    and a deteriorating power market over the past two years, there is no
    indication that DOE has adjusted credit subsidy estimates to reflect those
    dramatic changes.
  oOver-reliance on external contractors for key risk evaluations. DOE
    appears not to have built sufficient analytic tools and staff expertise
    internally to properly assess credit risks and deal structure.
  oInadequate control of credit subsidy assessment process.  Credit subsidy
    values were issued to borrowers before the credit subsidy model was
    finalized, and there is some indication that Vogtle Project borrowers may
    have been given access to the analytic models DOE used to assess credit
    risks and subsidy rates.

Sara Barczak, program director, Southern Alliance for Clean Energy, said: "The
Vogtle loan guarantee puts nearly 16 times as much at stake for taxpayers when
compared to Solyndra. Taxpayers cannot afford an $8.33 billion gamble when the
odds are stacked against them as badly as they are here. The very large
exposure to losses for U.S. taxpayers should the Vogtle Project go awry, along
with the known complexities of building two new reactors, underscore the
importance of an objective and unbiased review of the project, its borrowers,
and the appropriate credit subsidy level. Political interference increases
fiscal risks because political pressure can supplant economic and financial
assessments in driving funding decisions and terms."

Mindy Goldstein, director, Turner Environmental Law Clinic, said: "One of the
biggest problems plaguing the federal loan guarantee program is DOE's
reluctance to make documents available for public review. Despite committing
$8.33 billion dollars of taxpayer money, DOE fought tirelessly to keep much of
the information about the deal private. Only after repeated requests and
litigation were most of the documents reviewed in this report released in
full. Even more troubling, DOE appears unwilling to waiver from its practice
of secrecy – recent requests by Southern Alliance for Clean Energy for new
documents concerning the loan guarantees for the Vogtle Project have resulted
in incomplete and heavily redacted responses from the agency."

Doug Koplow, report author and founder, Earth Track, noted that: "Despite
widespread redactions, the documents released indicate significant problems
with the DOE's loan guarantee process. These include insufficient internal
expertise, inadequate oversight by other agencies, turnover of key staff,
indications of political involvement with borrowers and loan terms, and credit
subsidy payments that are likely too small to protect the taxpayer in a
default. Both the inadequate review process and the massive scale of the
Vogtle conditional commitment create troubling precedents."

Max Chang, report author and associate, Synapse Energy Economics, noted: "Our
review of the documents released by DOE indicate that the credit subsidy fee
has not changed for the three borrowers since February 2010. We know that
since 2010 the prospect for nuclear power has changed dramatically. These
include events like the devastating Fukushima Dai-ichi nuclear accident in
2011, project delays with Vogtle, and declining power prices as a result of
surging supplies of natural gas."

Additional report highlights include the following:

  oOver reliance on third parties to assess the risk for taxpayers. "While
    some external input is useful in order to bolster DOE's expertise (e.g.,
    review by external credit rating agencies), the released documents suggest
    that all key tools used to assess project risk were developed and held by
    private companies, and that individuals outside of the government were
    relied on for most tasks related to modifying and interpreting model runs,
    and addressing deal structure. Extensive redactions in credit subsidy
    models precluded third-party review of the validity of either the input
    assumptions or the results."
  oPrincipal repayment delayed as long as possible, maximizing the interest
    rate subsidy to borrowers.  According to released documents, none of the
    more than $3 billion in principal that Georgia Power will borrow gets
    repaid before years 29 and 30 of the loan. Back-loading of repayments is
    known as a "balloon structure," and OMB expressed a desire not to see it
    repeated on other guarantees. Both MEAG and OPC are also slated to have
    large amounts of debt remaining at the end of the 30-year loan term and
    will need to refinance to pay off the DOE.
  oDisagreements between DOE and OMB on credit subsidy amounts were evident
    in the released documents. However the details and extent of the
    disagreements, as well as how differences were bridged, have all been
    entirely redacted.

Earth Track and Synapse Energy Economics conducted a preliminary review of
hundreds of documents (available at
associated with the $8.33 billion conditional loan guarantees committed by the
U.S. Department of Energy for the construction of two proposed
Toshiba-Westinghouse AP1000 nuclear reactors, Vogtle 3 and 4 in Georgia. The
released documents relate to three individual borrowers: Georgia Power
Corporation, Oglethorpe Power Corporation, and Municipal Electric Authority of
Georgia and include virtually unredacted term sheets and credit subsidy

Southern Alliance for Clean Energy promotes responsible energy choices that
create global warming solutions and ensure clean, safe and healthy communities
throughout the Southeast. Founded in 1985, SACE is the only regional
organization primarily focused on developing clean energy solutions throughout
the Southeast. For more information, see

EDITOR'S NOTE: A streaming audio replay of the news event will be available
on the Web at as of 5 p.m. EST on January 30,

SOURCE Southern Alliance for Clean Energy, Atlanta, GA

Contact: Alex Frank, +1-703-276-3264, or
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