(Bloomberg) -- President Donald Trump is dipping into a federal loan program that his administration has repeatedly sought to kill as a way to rescue a struggling nuclear power project in Georgia that critics say poses a credit risk to U.S. taxpayers.
The Trump administration announced Friday it’s finalizing a $3.7 billion loan guarantee for two nuclear reactors being built by Southern Co. Called Plant Vogtle, it’s the only nuclear facility under construction in the U.S. and one seen as vital for an industry that’s lagged due to competition from cheaper natural gas and renewable energy.
“This is the real new green deal,” Energy Secretary Rick Perry said Friday during a visit to the site near Waynesboro, Georgia, alongside Georgia Governor Brian Kemp and Southern Chief Executive Officer Tom Fanning. “If you want clean energy that helps your environment, there is no source that is cleaner than nuclear energy. This is it.”
The source of the aid is an Energy Department loan program that’s been in the cross-hairs of the Trump team since before his inauguration, when his transition team saw it as corporate welfare. Trump has asked Congress to ax the program for three years running, including in the budget submitted this month, arguing that financing provided by the fund should come from the private sector instead.
“It seems to be if its good for our friends, it’s good policy,” said Jeff Navin, who served as acting chief of staff for Ernest Moniz, President Barack Obama’s energy secretary. “And when it’s bad for our friends, it’s bad policy.”
The loan program is best known for backing a half-billion-dollar loan guarantee to failed solar-panel maker Solyndra LLC, but it’s also issued a $465 million loan to automaker Tesla Inc. and backed some of the first large-scale U.S. solar photovoltaic farms, among other clean technologies.
Overall the program has generated more than $2.5 billion in interest for the federal government and has loan-loss ratio of 3.1 percent, according to Energy Department data.
“The only justification for eliminating the program is pure ideology,” said Navin.
The White House Office of Management referred questions to the Energy Department, which didn’t respond to requests for comment.
$28 Billion Tab
Supporters of Plant Vogtle say Trump is helping to keep alive a project started by the Obama administration that’s needed to help the U.S. remain competitive in the field of carbon-free nuclear power.
“With the top going onto unit 3 at Vogtle, we have the most difficult work behind us,” Tim Echols, a member of the Georgia Public Service Commission that has backed the project, said in an email.
The aid to Southern and its partners building the plant comes on top of a record $8.3 billion in loan guarantees inked by the Obama administration for the project, bringing the total amount of exposure to taxpayers to $12 billion.
That’s raised concerns among watchdog groups and critics of the project, which is supposed to be completed in late 2022, who are questioning the wisdom of more government loans.
“It would be a gross understatement to say this decision is fiscally reckless,” said Ryan Alexander, president of Taxpayers for Common Sense, a non-partisan group based in Washington. “Putting the full faith and credit of the U.S. Treasury behind a project after it’s been plagued by skyrocketing costs and multi-year delays is an unjustifiable handout to the well-heeled Southern Company and its partners. Throwing good money after bad is never good policy.”
The project, which is more than five years behind schedule and has doubled in cost to $28 billion, was dealt a major setback after contractor Westinghouse Electric Co. went bankrupt in 2017. Southern assumed responsibility for managing construction of the project after that.
Southern’s Georgia Power utility disclosed in August that costs had increased by another $2.3 billion for the entire project, leading its primary municipal co-owners, Oglethorpe Power Corp. and Municipal Electric Authority of Georgia, to consider pulling out. Southern agreed to take on an additional portion of the financial risk for the project if estimated costs jump beyond current levels and gained more control over the fate of the plant as part of a deal to move forward on the project.
‘Size and Complexity’
“Although the project appears to have made considerable progress over time, I think that given its size and complexity one should be cautious in coming to any firm conclusions as what the ultimate project execution will be at this point,” Paul Patterson, an analyst for Glenrock Associates LLC, said in an email.
A staff report on the project by the Georgia Public Service Commission in November of last year said “direct construction” of the project was 50 percent complete and concluded that “at this time the status of the project is uncertain.”
A Southern spokesman said “significant progress” continues at the site and that it remains on track the project for completion by November 2022.
(Updates with Perry comments, background from third paragraph.)
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