Nuclear Loan Guarantees Aren't Just Guarantees: They Are Actual Taxpayer Loans

President Obama's announcement yesterday of a
"conditional" $8.3 billion loan "guarantee" to the
Southern Company for construction of two nuclear reactors in Georgia obscured
an important fact about the loan guarantee program: taxpayers are not just
providing a guarantee, they also will be providing the actual loans.

According to a press release from Southern Company yesterday,
"Total guaranteed borrowings would not exceed 70 percent of the company's
eligible projected costs, or approximately $3.4 billion, and are expected to be
funded by the Federal Financing Bank." (Note: the discrepancy in
amounts--$3.4 billion vs $8.3 billion, is because Southern Company is only a
partial owner of the two reactors, the rest of the funds will go to the other
owners).

The Federal Financing Bank (FFB) is a little-known government entity that
more typically makes loans to universities, colleges, rural electric co-ops and
other small-scale projects. Interest rates from the FFB may be lower than
offered by private financial institutions. Use of the FFB means that the loans
themselves for new reactor construction will come from taxpayers, putting
taxpayers in the risky business of both providing the loans and guaranteeing to
themselves that the loans will be repaid.

Similarly, UniStar Nuclear, which is said to be on the Department of
Energy's "shortlist" of loan guarantee applicants, states in
its license application to the Nuclear Regulatory Commission, "It is
expected that, with respect to the portion of the debt guaranteed by the
Department of Energy under the loan guarantee program, the source of financing
will be the Federal Financing Bank, and with respect to the portion of the debt
insured by export credit agencies, the source of financing will be commercial
banks."

"This is not like Dad co-signing a loan for a child's first
car," said Michael Mariotte,
executive director of Nuclear Information and Resource Service. "The idea
that these are just loan "guarantees" is fictitious: these are
actual loans. Giant nuclear utilities will be raiding the federal treasury for
money to build reactors, and they are expecting the taxpayers to bail them out
if the project goes bad."

"Coupled with Secretary Chu's astonishing admission
yesterday that he was unaware of the Congressional Budget Office report
estimating a 50% failure rate for new reactor projects, the administration has
chosen a path of enormous risk to taxpayers and is obscuring the real nature of
that risk," said Mariotte.