Comments on a Plan for Obtaining Private Financing for the Clinch River Breeder Reactor

In response to a congressional request, GAO presented a followup report of the progress of Department of Energy (DOE) plans to obtain private financing for the Clinch River Breeder Reactor (CRBR). In an earlier review, GAO had found that plans issued by DOE and the CRBR financing company in March 1983: (1) represented the beginning of a process that would require much more work and a tradeoff between short-term budgetary savings and possible higher overall Government costs for the project; and (2) did not provide sufficient information to adequately analyze the tax benefits of private financing.

GAO found that the private financing plan which DOE submitted to Congress on August 1, 1983, represented a more detailed version of the plan outlined in the March reports. The basic concept remains the same: with appropriate Government guarantees, the revenues from CRBR-generated electricity, and available tax benefits, investors could be found to finance a portion of the remaining CRBR cost. The revenues from the sale of CRBR-generated electricity will be used to pay back private investors and, if that revenue is inadequate, the plan calls for the Federal Government to provide all additional funds. The latest plan calls for the project to be a joint venture comprised of the Federal Government and a partnership of private investors. The plan anticipates that the initial private sector debt financing will be provided from $675 million in short-term, 10-percent construction loans from several large, private lenders. The CRBR financing company anticipates raising $150 million by selling equity shares in the CRBR. It also considers $175 million in utility contributions to be part of the $1 billion private investment package and the remaining undelivered portion of the utilities' original $257 million pledge. These latter funds would be provided for CRBR even if the private investment plan were not implemented. Tax benefits for the equity participants are better defined in the new plan. GAO concluded that, because the investors have not been identified, the net effect of private investment on tax revenues is uncertain.