Washington (Platts)--9Nov2011/503 pm EST/2203 GMT

It is "almost inconceivable" that Exelon would consider building a third nuclear power reactor at Constellation Energy's Calvert Cliffs plant in Maryland after Chicago-based Exelon merges with the Baltimore-based company, CEO John Rowe told reporters Wednesday.

Constellation, as part of UniStar Nuclear Energy, applied to the US Nuclear Regulatory Commission in July 2007 for a combined construction permit-operating license to build a new unit at the two-unit Calvert Cliffs plant using Areva's US EPR design. That application is still under review.

But in October 2010, Constellation pulled out of a deal with the US government for loan guarantee for Calvert Cliffs-3, saying the terms of the agreement were too onerous. Subsequently, it sold its UniStar stake to joint venture partner EDF for $140 million.

Article continues below...

Sign up for Nucleonics Week
	Since 1960, Platts Nucleonics Week has been the leading source of global news for the commercial nuclear power business. Electricity and uranium traders and other industry professionals rely on Nucleonics Week for information about the nuclear power industry that will help them make informed, accurate, and profitable decisions.

Exelon and Constellation proposed the merger April 28 in an all-stock deal worth $7.9 billion. Shareholders of both companies are scheduled to vote on the deal November 17.

Exelon's 17-unit nuclear fleet is the nation's largest. Rowe has previously said that new nuclear power units are not economically competitive in the US, and in 2009 Exelon abandoned plans to pursue an NRC license to build a nuclear plant at a greenfield site in Victoria County, Texas.

The Calvert Cliffs-3 project is "utterly uneconomic," Rowe said after a speech at the Bipartisan Policy Center in Washington.

Exelon "operates in a merchant environment. We can't make a long-term decision that's uneconomic because we have no regulatory protection for that," he said.

"At today's [natural] gas prices, a new nuclear power plant is out of the money by a factor of two," Rowe said, echoing one of the main points of his speech. "It's not 20%, it's not something where you can go sharpen the pencil and play. It's economically wrong. Gas trumps it," he said.

Given recent discoveries of enormous shale gas resources, Rowe said, natural gas prices are expected to remain below $6-$8/MMBtu for the foreseeable future.

Rowe said Exelon "will probably make a deal with the political leadership in Maryland," where Constellation is based, to add "some additional renewables and conceivably even some more gas-fired" capacity to the generation mix of a combined company.

"But it is, I think almost inconceivable that Calvert [Cliffs]-3 could be a part of that," he said.

The Maryland Public Service Commission began public hearings on the merger proposal October 31 and plans to issue a decision by year-end.

An EDF spokesman said Wednesday: "As we have consistently indicated, a number of different factors need to align before a project of the scope of Calvert Cliffs 3 (CC3) is brought to fruition. UniStar and EDF continue their work, including with US elected officials, regulators and other stakeholders, to sustain the long-term viability of CC3 and believe in the benefits that new nuclear would bring to Maryland and the US."

Laura Eifler, a UniStar spokeswoman, said Wednesday, "UniStar has nothing additional to add" to the EDF statement.

In May, UniStar said it wanted the NRC to forestall action on its license application to build and operate a third reactor at Calvert Cliffs because the company is seeking to sell a portion of itself to a US corporation.

UniStar also cited low gas prices that make any need for any new generation less urgent.

Areva does not have any information on "when and if Calvert Cliffs-3 will be built," company spokeswoman Susan Hess said Wednesday.

Constellation did not respond immediately to a request for comment.

EDF, which owns 7.26% of Constellation shares and remains a nearly equal partner in the Baltimore-based company's nuclear business, in October asked Maryland regulators to block the proposed Constellation-Exelon merger.

EDF said the proposed merger creates the substantial likelihood that Constellation Energy Nuclear Group for regulatory reasons would not be allowed to acquire new generation in the PJM Interconnection market.

EDF owns 49.9% of CENG, which includes the 1,750-MW Calvert Cliffs nuclear station and two nuclear plants in New York totaling 2,349 MW of capacity.

One of EDF's chief concerns is that the proposed combination would preclude EDF from investing in CENG or expanding the company's generating capacity.

Exelon "is resoundingly silent" on the question of how it could support the prospects of a third unit at Calvert Cliffs, which would provide "massive" economic benefits to the state's economy, EDF said in its October filing.

If Exelon were truly interested in bringing benefits to Maryland, it could have volunteered to team up with the French companies on Calvert Cliffs 3 as a US partner, EDF said. EDF as a foreign-owned company needs a US partner to build the third reactor.

--Steven Dolley, steven_dolley@platts.com; --Jim Ostroff, james_ostroff@platts.com
--Mary Powers, newsdesk@platts.com

Tweet