Construction Costs Will "Soar" for New US Nuclear Power Plants

Standard & Poor's Ratings Services said in an October 15 RatingsDirect paper. S&P said
construction risk issues that are "more acute" for new nuclear units than for
other types of power projects include "cost inflation in input materials and
labor, especially nuclear-related labor; unavailability of turnkey engineering,
procurement and construction (EPC) contracts and supply chain bottlenecks; a
limited construction track record; and the Nuclear Regulatory Commission's
supervisory process." As a result of several risk factors, S&P said it expects
"project contingencies to be high to accommodate uncertainty in pricing. In many
instances components of the overall EPC will be contracted separately and may
start as time and material initially and progress over time to fixed costs." The
NRC's "untested supervision process" for reviewing applications for and
construction of new reactors is "a wild card," and "a smoothly functioning"
process is "key for the credit quality of new nuclear projects," S&P said. S&P,
like Platts, is a division of The McGraw-Hill Companies.