Saturday, April 20, 2019

The nuclear reactor decommissioning business

One of the most prominent nuclear generating stations in the United States is changing owners after it ceases generating electricity.
Tuesday 16th April 2019 [SNC Lavalin]
Comprehensive Decommissioning International, LLC (CDI), a joint venture company of SNC-Lavalin (TSX: SNC) and Holtec International, has agreed to enter into a Decommissioning General Contractor Agreement for another US nuclear decommissioning contract, expected to exceed CAD $1 billion.
Entergy Corp. (NYSE: ETR) has agreed to sell the subsidiaries that own Indian Point Units 1, 2, and 3, located in Buchanan, N.Y., to a Holtec International subsidiary for decommissioning.
CDI, the joint venture, may be the best news for SNC Lavalin in some time. The pending purchase of Entergy's Indian Point reactors follows within a year of its agreement to purchase Exelon's Oyster Creek nuclear power plant and Entergy's Pilgrim and Palisades sites (once the reactors are shutdown permanently).

Most articles on the sales note CDI intends on decommissioning the sites much quicker than expected, but I thought it worth following up on the size of the decommissioning funds - which are part of the purchase. There are references in many articles to the size of the funds, but I'll use only one source: the U.S. Nuclear Regulatory Commission (NRC) 2017 Fund Status Reports.

Keep in mind the funds are as at the end of 2016 and the NRC's cost estimate is in 2016 dollars.

The reactor first retired in this list, Vermont Yankee, was sold to another company, Northstar Group, despite concerns with adequacy of the decommissioning funds. The sites being purchased by Holtec/CDI look to be better funded, with $4 billion in funds (as of 2016's end) for $3.7 billion in estimated costs.

Ontario readers may be curious how the funding is for decommissioning here. My understanding/confusion is limited but hopefully I won't mislead in summarizing it this way: Ontario Power Generation (OPG) collectd funds, through its rate for electricity, for a Decommissioning Segregated Fund and a Used Fuel Segregated Fund, and both are well funded. The funds are government by a nuclear funds agreement (ONFA) which allows the province to claim as revenue half of the over-funded position when the fund has a value exceeding the predicted liability by over 20 percent. Here are figures for both of the segregated funds from OPG from their 2018 financial reporting, but only the Decommissioning Segregated fund is the comparable to the U.S. figures discussed above.

My understanding is the CDN$9 billion (US$ 6.75 billion) Decommissioning Segregated Fund is over-funded by CDN$4 billion (1/2 of the over-funding beyond 120% of liability is $1.5 B; twice that is $3 billion leaving $6 billion as the 20% over-funded position meaning the liability is CDN$ 5 billion).

Theoretically the province could sell off sites to decommissioning firms, but I'd note in the U.S. utilities have not done this with retired reactors - perhaps because their consumers take the downside risk.

Bruce Power, Ontario's other nuclear provider, leases its site from OPG - so the figures for those reactors should be included in OPG's reported figures.

Finally, approximately $3.5 billion shown in OPG's reporting as "Due to Province" does already appear on the provincial books on the asset side of the ledger, having to begun growing in fiscal 2007-08. I'm not sure I'd call it a hidden tax on nuclear, but its worth noting the nuclear funds are a net asset to the province.

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