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Constellation Halts ‘Unworkable’ Nuclear Project Loan

Constellation Energy Group Inc. has told the U.S. Department of Energy it cannot proceed with the loan guarantee application for UniStar Nuclear Energy LLC’s Calvert Cliffs 3 nuclear energy facility project in Maryland.

The proposed terms and conditions of the guarantee are “unworkable” and the cost of the loan as calculated by the Office of Management and Budget is “unreasonably burdensome,” Constellation said in a statement today.

The Baltimore-based company, which was developing the Calvert Cliffs project with Electricite de France SA, said it has written to the Department of Energy about the matter.

Constellation said “no decisions have been made regarding the future of Calvert Cliffs 3.”

EDF said it was “extremely disappointed and shocked” that Constellation had “unilaterally decided” to withdraw from the project.

“Constellation knows that we were at the finish line,” Paris-based EDF said in an e-mailed statement. It has withdrawn “in spite of our repeated efforts to substantially decrease their exposure and risk to the project.”

EDF bought half of Constellation’s nuclear business for $4.5 billion in 2009 when the French utility was headed by Pierre Gadonneix. The deal helped it keep a foothold in the U.S. and thwarted a takeover of Constellation by Warren Buffett’s MidAmerican Energy Holdings Co.

‘Timely Path’

Constellation said there was “a significant problem” in the way the Office of Management and Budget calculates the credit cost.

“After repeated unsuccessful attempts to resolve this issue with DOE and OMB, we no longer see a timely path to reaching a workable set of terms and conditions,” the statement said.

Constellation spokesman Lawrence McDonnell declined to comment further on the company’s statement or on the response by EDF. He also declined to comment on whether Constellation has decided to exercise its option under the 2008 agreement, when EDF acquired its stake in its U.S. reactors, to sell up to $2 billion of non-nuclear power plants to EDF.

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