House Speaker John Boehner attacked the Obama administration for financing failed solar-panel maker Solyndra LLC, saying government shouldn’t pick winners and losers. That hasn’t stopped him from demanding that the U.S. make a winner of a nuclear-fuel plant in Ohio, his home state.
Boehner is backing a $2 billion Energy Department loan guarantee sought by USEC Inc. (USU) for its American Centrifuge Plant in Piketon, Ohio, aimed at enriching uranium for commercial nuclear reactors.
“When it comes to emerging energy technologies, the Republicans don’t want to pick winners and losers -- unless it’s nuclear power,” Ellen Vancko, nuclear energy and climate-change project manager in the Washington office of the Union of Concerned Scientists, said in an interview.
The collapse of Solyndra, which filed for bankruptcy protection last month, two years after receiving a $535 million federal loan guarantee, isn’t a reason to withhold financing from USEC, Boehner said in a Sept. 30 posting on his website. He cited a promise by Obama in his 2008 presidential campaign to aid the company.
“In the midst of the Solyndra controversy that has raised serious questions about the Obama administration’s oversight of taxpayer dollars, hundreds of Southern Ohio workers stand to lose their jobs if the Obama administration reneges on the president’s promise to support an energy project in the small town of Piketon, Ohio,” Boehner wrote. “I urge the administration to not betray the citizens of Ohio.”
USEC’s political action committee has given $10,000 to committees supporting Boehner since 2010, according to filings with the Federal Election Commission.
In an interview with Fox Business Network on Sept. 19, Boehner said that “for the federal government to be out there picking one company over another, one type of energy source over another. I think is wrong.”
The American Centrifuge Plant, owned by Bethesda, Maryland- based USEC, has been a demonstration project since August 2007, its development slowed by technical and financial setbacks. The completed plant would have about 11,500 spinning centrifuges, each about 40 feet (12 meters) high, to separate the uranium isotope needed for nuclear fuel, according to Paul Jacobson, a company spokesman.
Among its troubles was a power outage in June that damaged some of the centrifuges.
USEC said Sept. 30 that it would probably have to fire workers at the facility, about 90 miles (145 kilometers) east of Cincinnati, unless it received conditional approval for a loan guarantee by the end of this month.
USEC, which rose 4 percent to $2.32 today in New York trading, has fallen 53 percent in the past year. The company reported a loss of $21.2 million for the second quarter, compared with net income of $7.2 million in the same period last year. USEC is rated hold by all five analysts surveyed by Bloomberg.
The Energy Department, which has spent more than three years reviewing USEC’s loan-guarantee application, moved last week to buy more time. The department proposed spending as much as $300 million in federal funds to help make the project work.
The company’s loan-guarantee request remains pending while the Energy Department and USEC work on “reducing technical and financial risks associated with the project,” Damien LaVera, a department spokesman, said in an e-mailed statement.
USEC and the Energy Department are still discussing the $300 million proposal, Jacobson, the company spokesman, said in an e-mail.
Boehner is reviewing the plan, which would need congressional approval, spokesman Michael Steel said in an e- mail. The plant is in the district of Republican Representative Jean Schmidt, who said on her website that “the best way forward is for President Obama to keep the promise he made to Southern Ohio and provide the loan guarantee now.”
The delay would give “the company at least a year and a half of funding,” Ben-Ari Elias, an analyst with Sterne, Agee & Leach Inc. in New York, said in an interview. That would let Obama sidestep conflicting pressures over the issue until after the election next year, when Ohio may play a pivotal role in his re-election bid. Ohio Democrats such as Senator Sherrod Brown support the loan guarantee.
“You’re kind of damned if you do, damned if you don’t,” Paul Clegg, a senior equity research analyst at Mizuho Securities USA Inc. in New York, said in a phone interview. The Energy Department would “face a pretty difficult constituency in Congress” if it failed to support the Ohio plant, while the department “is very sensitive to all of the attention it’s getting” over Solyndra, he said.
Democrats, including Representative Edward Markey of Massachusetts, called in a letter yesterday for House committees to investigate nuclear-power subsidies that Republicans support, along with clean-energy companies such as Solyndra that they are already probing.
USEC’s American Centrifuge Plant is a “nuclear boondoggle” that hasn’t secured a loan guarantee “because its business is faced with a shrinking customer base, declining prices, intense competition and problematic technology,” Markey, the senior Democrat on the House Natural Resources Committee, said in an Oct. 24 statement.
The Piketon uranium-enrichment plant will cost $4.8 billion, Jacobson said in an interview. Its construction and operation will create about 7,400 jobs in eight states, according to the company’s website.
Toshiba, Babcock & Wilcox
USEC has already invested $2 billion in the project and is seeking additional financing from Toshiba Corp. (6502) of Tokyo and Babcock & Wilcox Co. (BWC) of Charlotte, North Carolina, which have invested a combined $75 million so far.
USEC was a government corporation from 1993 until it was privatized in 1998, according to the company’s website. It’s the U.S. government’s exclusive agent to sell uranium recycled from dismantled Russian nuclear warheads to utilities.
The Ohio facility will consume about 95 percent less electricity than USEC’s existing, 59-year-old plant in Paducah, Kentucky. That plant, which employs about 1,200 people and uses different technology, would be replaced by the Ohio facility eventually, Jacobson said.
“The U.S. government has a pretty long history of supporting the development of critical technologies like our centrifuge project,” Jacobson said.
Not Like Solyndra
The Energy Department gave Areva SA of Paris conditional approval in May 2010 for a $2 billion loan guarantee to build a centrifuge plant in Idaho Falls, Idaho, that will use existing technology. The plant may begin enriching uranium by 2015, Areva spokesman Jarret Adams said in a phone interview.
Solyndra’s failure should have no bearing on USEC’s pursuit of a federal guarantee, Jacobson, the company spokesman, said.
Unlike Solyndra, which failed in the face of cheaper solar panels from China, USEC has almost $3 billion in future sales under contract to utilities, and the company holds about 25 percent of the $8 billion global market for uranium enrichment, Jacobson said.
“There’s a pretty dramatic difference between us and Solyndra,” he said.
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