Last week, President
Obama lauded those who have made an especially
meritorious contribution to the United States,
world peace and culture by bestowing upon
them the Presidential Medal of Freedom.
Among this years recipients was the “World’s
Greatest Investor,” also one of the world’s
greatest philanthropists Warren Buffett.
Instead of merely lauding the Oracle of
Omaha, President Obama should follow his
lead and stop pursuing costly new nuclear
power plants. Time and again, Buffett's
corporation MidAmerican has recognized the
risks of investing in new nuclear power.
In 2007, MidAmerican,
a subsidiary of Buffett’s Berkshire Hathaway
conducted their economic due diligence on
the prospects of building a new nuclear
reactor; the numbers just didn’t add up.
According to MidAmerican’s president, “Consumers
expect reasonably priced energy, and the
company's due diligence process has led
to the conclusion that it does not make
economic sense to pursue the project at
this time." In January 2008, MidAmerican
scrapped its plans for a new nuclear reactor
in Idaho.
In September 2008, Buffett’s
MidAmerican purchased the pro nuclear Constellation
Energy. Despite the fact that MidAmerican
affirmed Constellation’s plans for new reactors
in Maryland, Electricity de France (EdF)
was concerned that MidAmerican would eventually
reach the same conclusion it did in Idaho
and pull the plug on the new reactors proposed
for the Calvert Cliffs site. The Financial
Times reported that, “The French group’s
offer is clearly aimed at scuppering the
$4.7bn bid made by Mr. Buffett’s MidAmerican
Energy in September, which it fears could
threaten Constellation’s future nuclear
investment capacity.” Despite buying out
Buffett the deal between the French &
Constellation to build new reactors has
since collapsed.
Unfortunately the President
has not emulated the Oracle of Omaha and
recognized the abysmal economics of nuclear
power. Buried in President Obama’s multi-trillion-dollar
budget is a $38 billion dollar giveaway
to Fortune 500 nuclear corporations in the
form of loan guarantees. But the non-partisan
Congressional Budget Office (CBO) has already
cautioned against making these guarantees
for new nuclear plants stating that:
CBO considers the risk
of default on such a loan guarantee to be
very high—well above 50 percent. The key
factor accounting for this risk is that
we expect that the plant would be uneconomic
to operate because of its high construction
costs, relative to other electricity generation
sources.
But its not only Warren
Buffet & CBO that have rejected new
nuclear power as an economic non starter:
In June 2009, Moody’s
Investment Services determined that new
nuclear investments were a “bet the farm”
risk. According to Moody’s “(w)e view new
nuclear plans as a ‘bet the farm’ endeavor
for most companies, due to the size of the
investment and length of time to build a
nuclear power facility.”In November 2009,
Citi’s review of new nuclear power determined
that the risks “are so large and variable
that individually they could each bring
even the largest utility company to its
knees financially.” Citi concluded that,
“(t)hese risks can be classed as Corporate
Killers.” In August 2010, Standard &
Poor’s stated that, “(g)iven the significant
capital costs, even modest overruns or schedule
delays can impair the balance sheets of
even the largest U.S. Utility companies
engaged in nuclear power plant construction.
Furthermore the recent decline in natural
gas prices also raises the question of the
longer term competitive viability of nuclear
power as a base load energy source.”Rather
than merely wrapping a medal around Warren
Buffet’s neck and lauding the Oracle of
Omaha, President Obama should follow his
lead. New nuclear reactors are an economic
meltdown waiting to happen and sadly President
Obama has put the American taxpayer on the
hook for the financial fall out.
