Texas judge warns CPS in Texas nuclear suit

On Friday, a Texas state judge ruled that CPS may withdraw its financial support from the $10 billion project, but it can't expect to retain its 50 percent ownership stake, according to a court transcript.

"If you want to be in the play, you have to pay, or you can't stay," Judge Larry Noll said. "You will eventually lose your equity share."

The judge directed the parties to go back and negotiate a settlement to address questions not covered in existing contracts regarding project ownership and withdrawal.

"We feel it was an excellent decision," NRG spokesman Dave Knox said. "Now we hope we can bring parties to the table who are willing and motivated to negotiate."

CPS officials were not immediately available to comment.

The judge's order covers only the first phase of the suit. A second phase, related to CPS claims that it was mislead about cost estimates for the project, remains unresolved.

NRG's ownership dispute could be the second setback for new nuclear reactors in the United States, after FPL Group Inc said this month it would halt billions of dollars in capital expenditures, including reevaluating development of two new reactors, after getting a negative rate case ruling from Florida regulators.

Before the judge's ruling Friday, Crane told analysts and investors in a conference call that suspending the project could cause NRG to take a pretax write-off of $400 million.

He could not predict the timing of any potential write-off, noting it depended on the ongoing litigation with CPS Energy.

CPS is a 50-50 partner with Nuclear Innovation North America, a partnership between NRG and Toshiba Corp, to build the two reactors in Texas.

In December, CPS, a municipal utility owned by San Antonio, sued NRG for $32 billion, alleging NRG mislead utility officials on the cost of the new reactors, among other things.

Crane said before the CPS dispute, he thought the South Texas project was one of the front runners to get a federal loan guarantee. But now, Crane said, he did not believe the Department of Energy would risk any of the $18.5 billion loan guarantee funds available on a troubled project.

"NRG will not continue to pursue the project if we cannot get the loan guarantee," Crane said, telling investors, "We won't squander your money if it looks hopeless."

(Reporting by Scott DiSavino and Eileen O'Grady; Editing by Walter Bagley)