Municipal utilities contest NRG's $1.75B Texas nuclear plant stake sale

Two Texas municipal utilities are asking the US Nuclear Regulatory Commission to suspend and dismiss NRG Energy Inc.'s application to sell its share of the South Texas Project nuclear plant to Constellation Energy Corp. as part of a $1.75 billion transaction.

NRG plans to hand over its 44% stake in, and its license for, the 2,645-MW plant by the end of 2023, but City Public Service of San Antonio and Austin Energy told the commission July 31 that the operating entity, South Texas Nuclear Project Operating Co., did not approve the application, which "requires a vote of two or more participants having in excess of 60% ownership."

Both utilities are still evaluating whether to exercise their right of first refusal for part or all of NRG's 44% share of the South Texas Project, they told the NRC. The San Antonio utility, which does business as CPS Energy, owns a 40% share and Austin Energy owns 16%.

"There is no basis to expend agency resources — much less on an expedited four-and-a-half-month track — reviewing an application that was submitted without authority and while CPS Energy and Austin are still evaluating their contractual ... option," the filing said.

The utilities added in the filing that they have "made a sincere effort to confer" with NRG and Constellation.

Even if CPS Energy and Austin Energy do not end up adding to their ownership interests, the planned deal as submitted in the NRC application still causes "financial injury," the filing said.

"The proposed application harms their existing ownership interest by seeking to modify and reduce the parental support obligations associated with NRG's 44% ownership share by $30 million," the filing said. "Those actions would increase the 'risk of being forced to assume a greater-than-expected share of ... operating and decommissioning costs.'"

CPS Energy is also suing NRG in the Matagorda County, Texas, district court over the right of first refusal, with Austin Energy as an intervenor.

NRG responded in an SEC filing that "the claims set forth by CPS and Austin Energy both in the lawsuit and the NRC motion are without merit." The independent power producer "intends to vigorously defend against them" as well as "pursue other legal rights and remedies."

Analysts at Guggenheim wrote Aug. 2 that they are not concerned by the utilities' actions.

"Per our catch up with the company, there are multiple layers to the ownership structure of STP, with the participation agreement at the project level specifically exempting the upstream entity from a [right of first refusal] in their view," Guggenheim wrote. "We see this set of actions as noise at this juncture (unclear if San Antonio/Austin could even assemble a rival offer), with the NRC venue a particular irregularity given this is more of a legal/contractual dispute."

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