HOUSTON NRG Energy Inc's $10 billion nuclear plant expansion planned for South Texas may never get off the drawing board as repercussions from the nuclear disaster in Japan spread, analysts said on Monday.
Standard and Poor's warned clients that the risk of cancellations or delays for existing and future nuclear projects has increased as a result of the situation in Japan.
Japanese engineers raced to prevent a meltdown at a stricken nuclear plant on Tuesday. Earlier, a second explosion rocked the Fukushima nuclear complex and rapidly failing water levels exposed fuel rods in another reactor.
The situation in Japan will likely make it tougher for some projects to move forward, including NRG's plan to add two units to an existing facility, analysts said.
"For NRG Energy we think the potential added pressure could be the end of its nuclear loan guarantee award from the Department of Energy for STP (units) 3 and 4 in Texas which could cause a write-off in the short term, but would be likely positive in the long-term," Barclays wrote in a note to clients.
Earlier this month, the company's plan to build and operate two new nuclear reactors at the plant 90 miles southwest of Houston, Texas, cleared a U.S. government environmental hurdle as the company and its partner Toshiba Corp kept working to obtain critical federal loan support.
Tokyo Electric Power Co also has agreed to invest $125 million in the project, but that investment is contingent on DOE loan support.
Analysts at Moody's said the Japanese nuclear problems create "uncertainty" for the NRG expansion project, but abandoning the project would be a positive for the company due to uncertainty over its cost.
The joint venture called Nuclear Innovation North America (NINA) also awarded an engineering and construction contract for the new reactors to a consortium formed by Toshiba America Nuclear Energy Corp and The Shaw Group.
Shaw's exposure to the nuclear end-market includes new plants currently under construction in the United States and China and its 20 percent ownership stake in the Westinghouse Electrical Co LLC, a nuclear technology provider, Standard & Poor's said.
NRG declined to speculate about the future of the Texas project, saying the focus for now should be on Japan.
"Right now, our focus is on the safety of the friends and partners we have in Japan," David Knox an NRG spokesman, said. "As far assessing the impact on the U.S. nuclear industry, there is going to be time for that in the days and weeks to come."
Shares of Shaw ended 9 percent lower at $34.87 after falling as much as 28 percent on the New York Stock Exchange. NRG shares closed almost 2 percent higher at $20.17.
(Reporting by Anna Driver; Editing by David Gregorio)