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Davis-Besse start-up is pushed back

10/08/02

John Funk and John Mangels
Plain Dealer Reporters

The Davis-Besse nuclear power plant won't be ready to make electricity until early next year, instead of the previous company forecast of Dec. 7.

And the total cost to replace its corroded reactor lid, fix other equipment and buy replacement power may reach nearly $400 million - as much as $115 million more than previously planned.

FirstEnergy Corp., owner of the power plant, said the new costs included $50 million in spending next year. The company had been trying to contain the impact of Davis-Besse to this year.

The company said the additional costs also include about $27 million for maintenance that had been planned for the future. Another $136 million covers the costs of purchasing electricity to replace Davis-Besse's output this year.

Stockholders, not rate payers, will eat all but $55 million to $75 million of the $400 million. That $55 million to $75 million - to replace the lid - will be spread over future years. As a result of Davis-Besse spending, FirstEnergy's profits this year could decline by up to 53 cents per share.

The Toledo-area plant has been down since February. Workers in March discovered that leaking reactor coolant, undetected for at least six years, had rusted a large hole in the reactor's 6-inch-thick steel lid.

Most of the major repair work in the plant - including the installation of the new lid - will be completed this year, corporate spokesman Ralph DiNicola said. "But as some of the work moves to year's end, we know we will be getting bills in '03," he said. "And some work will not be started until the plant is running again," he said.

The company also yesterday moved its restart target date from Dec. 7 to "early next year." FirstEnergy cannot be more specific at this point, DiNicola said, in part because it is working with hundreds of outside contractors and in part because the Nuclear Regulatory Commission has the final say.

The NRC has made it clear that it intends to inspect all of the repairs and newly installed equipment. Over the summer, for example, an agency inspector found problems with the training of company-paid inspectors. The NRC then ordered the company to retrain its inspectors and re-inspect the entire containment building. This process is pushing up costs, according to DiNicola.

"This is an interactive process," DiNicola said. "We are listening to the NRC. And we believe what we have provided today is a completely accurate indication of where the schedule stands and the costs that we expect to incur."

Analyst reaction to the new cost figures was muted.

"I don't think it's a huge event," said Paul Rizdon of McDonald Investments. "We knew costs were going up. I was hoping they could contain most of them in '02. But I think most analysts believed some costs would roll into 2003 and the Dec. 7 restart date to be very aggressive."

Most analysts are still convinced Davis-Besse is a one-time event, said James Halloran, analyst with National City's Private Investor Group.

"As long as they can get the thing started up in a reasonable time, say March or April, they will be OK," Halloran said. "But if they go past the one-year anniversary without any clear indication of when they will restart, they will get into trouble."

In the meantime, the stock will be volatile, said Rizdon. "It's going to trade with every headline that comes across the wires," he said.

FirstEnergy's stock price ended the day at $29.21, down 40 cents.

To reach these Plain Dealer reporters:

jfunk@plaind.com, 216-999-4138

jmangels@plaind.com, 216-999-4842


2002 The Plain Dealer. Used with permission.
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