The bankruptcy court for Energy Future Holdings and certain of its subsidiary companies on Nov. 20 approved a request to allow the companies to terminate Mitsubishi’s part of a joint venture deal for two stalled nuclear units at the Comanche Peak power plant.
The Comanche Peak Joint Venture involved the participation of Mitsubishi Heavy Industries Ltd. (MHI) and its affiliates, Mitsubishi Nuclear Energy Systems and MHI Nuclear North America.
In 2008, Energy Future Holdings companies including power generator Luminant formed a joint venture for the purposes of holding the assets of, and conducting the development, construction, and operating activities of, two new nuclear generation units and the use of an advanced type of nuclear reactor at these new units called the US-Advanced Pressurized Water Reactor (the “US-APWR”).
In January 2009, the limited liability company agreement was amended and restated to admit MHI and create a joint venture for purposes of further developing the new units using the US-APWR (called the “Comanche Peak Joint Venture”). With the addition of MHI, the joint venture was renamed Comanche Peak Nuclear Power Co. LLC.
The key terms of the Joint Venture Agreements included:
- MHI’s obligation to develop and implement the US-APWR;
- MHI’s obligation to file the design certification document application with the Nuclear Regulatory Commission (NRC) to gain approval for the use of the US-APWR;
- an obligation by an Energy Future company to guarantee obligations to make capital contributions under the LLC agreement;
- the division between the Joint Venture Parties of ownership interests in the Comanche Peak Joint Venture and certain related intellectual property developed in conjunction with the Design Application and the application governing construction of the new units; and
- Luminant’s covenant to use commercially reasonable efforts to assign and/or lease its water rights to the Comanche Peak Joint Venture for use in the development of the new units.
Fukushima accident, plunging gas prices helped put this project on ice
Said Energy Future’s Oct. 30 application with the court for MHI to withdraw from these agreements: “At the time the Joint Venture Parties entered into the Joint Venture Agreements, they expected to obtain NRC approval of the License Application and the Design Application in time for the New Units to be operational by 2016. However, certain events delayed licensing and development of the New Units. Specifically, in the wake of Japan’s recovery from the Fukushima nuclear plant incident in March 2011, in which all of Japan’s nuclear generating facilities were shut down (including 24 plants designed and built by MHI), MHI, with the support of Japanese regulatory agencies, determined that supporting Japanese utilities in restarting MHI-affiliated pressurized water reactors should be its highest priority. Additionally, a precipitous and prolonged decline in natural gas prices that resulted from increased exploitation and production of ‘unconventional’ natural gas fundamentally altered market conditions.”
The parties’ coordinated actions from there were designed to allow the Debtors to beneficially preserve Comanche Peak LLC, which hereafter will be wholly owned by an Energy Future company, because Comanche Peak LLC is the applicant under the License Application and the Department of Energy loan guarantee application relating to the new units. For a number of regulatory reasons, Luminant desires to keep these applications active after MHI’s withdrawal from the Comanche Peak Joint Venture.
The companies put all development activities related to the new units on indefinite hold as of the fourth quarter of 2013, and at MHI’s request, the NRC reduced its Design Application review activities. Contemporaneously with MHI’s request to the NRC, Energy Future companies also requested that the NRC suspend all reviews of the License Application.
Between August and October 2014, the Joint Venture Parties negotiated the conditions for MHI’s consensual withdrawal from the Comanche Peak Joint Venture. These negotiations culminated in the Withdrawal Agreements, which were approved by the bankruptcy court on Nov. 20.
The Comanche Peak plant’s current two units have a total net operating capacity of 2,300 MW, or 1,150 MW per unit. The new units, as applied for at the NRC, would be 1,700 MW each.
On April 29, Energy Future Holdings and 70 affiliated companies each filed petitions in the U.S. Bankruptcy Court for the District of Delaware seeking relief under Chapter 11 of the United States Bankruptcy Code. Since then, the companies have been working through various legal issues, with a possible sale of assets hinted at.