A nuclear renaissance has begun in this country.

Here is a cursory overview of what is coming and when, respectively: “Proposed New Nuclear Power Plants” and “First Wave or Second Wave?”. As you can see, the plans span decades. That is because nuclear energy facility construction requires years of wide-ranging and comprehensive planning, licensing and financing efforts. All of this is changing rapidly, but it is already underway. The extent of the work that will be bonded is not clear, but given the the risks, public responsibilities and probable general contractors, the use of construction contract surety bonds is likely. My personal opinion is that it is highly advisable, and I have written about it here:

Surety Bonds for Nuclear Energy Facility Construction Cost-Savings.

On a personal note, I should mention that before I had ever heard of a surety bond, I was involved in the tail-end of the last round of new nuclear construction in several capacities. I have been following the progress of the nuclear renaissance for about a year now, reading everything available and finally meeting some of the people involved in June. There is no primary source for this news and information, but there is an extensive blogosphere covering the developments. There are few traditional sources covering this other than highly-specialized, expensive paid sites and studies, very few of which specialize in the construction side of the nuclear industry, much less matters of interest to surety.

I would summarize my findings simply by saying that it looks like there is a sizable new market opportunity awaiting, but it is fraught with unfamiliar risks, particularly in regard to construction standards as well as nuclear and environmental regulations, state, federal and local. This is a whole other world of construction, folks.

“How big is that market?” I hear you asking. Well, $188 billion is one number that was floating around last last year. And at the National Press Club in July, Senator Lamar Alexander of Tennessee announced a $700 billion plan to almost double the number of reactors nationwide. There is similar legislation pending in Congress, e.g., the American Energy Act.
I am loathe to put a number on it myself, and hereby chastise the mainstream construction press for being so late to the game reporting on this with any kind of comprehensive summary. The numbers on the board change frequently for reasons including: federal licensing, corporate fluctuations, financing, federal loan guarantees and state approvals, listed here in no particular order. But I would submit that they are indeed substantial.

Due to their sheer size, complexity and duration, these projects do not easily lend themselves to bonding in their entirety. But some proportion of bonding is probably feasible for many of the subcontracts and large fabrications. In fact, “modularity” is a phrase used a lot in the renaissance circles, and that ties-in very well with surety, at least in my opinion. The overall financial guarantees for the general contracts with the utilities are mostly confidential, thus not revealed on the state utility regulatory websites. But just to give you number-hungry sureties one red-meat example, the first new project underway is Plant Vogtle 3 & 4 in Georgia, at $6.446 billion, so sharpen your pencils boys and girls. Other projects on the boards may be higher or lower, as some are expansions at existing facilities and others completely new. At least one of the general contractors involved has mentioned that there may be a need for financial guarantees for its subcontractors, citing surety bonds specifically. For a number of reasons, I think it can be expected that others will soon follow suit, if they have not already done so. You might want to give the old “heads-up” to reinsurers, as nuclear exclusions are prevalent in insurance and surely confusion will ensue among that quarter. Sureties which predominantly bond smaller subcontractors should also take note and dust-off the old guidelines from thirty years ago before they are blindsided. Questions may be forthcoming.

Bear in mind, these are only the domestic projects, dwarfed by what is planned worldwide. China, India, Brazil, Italy, the UAE, Finland and even Saudi Arabia are all in the mix. Those of you in international markets may have even greater opportunities there.

The surety industry has a lot to offer in this effort, as I’ve argued in the other post. I see it as an opportunity that should be explored.

by Surety Insider

The Federal Stimulus fund will refund surety bond premiums for contractors ARRA transportation infrastructure contracts.

See: Disadvantaged Business Enterprise American Recovery and Reinvestment Act Bonding Assistance Reimbursable Fee Program (DBE ARRA BAP)

“This new program, which will be administered by the Department of Transportation’s Office of Small and Disadvantaged Business Utilization (OSDBU), allows small and disadvantaged businesses to apply to be reimbursed for bonding premiums and fees incurred when competing for, or performing on, transportation infrastructure projects funded by ARRA. The program will be especially helpful for businesses with traditionally less working capital than larger contractors.”

The headline sure catches the eye, but how realistic is it? According to the site, only “small and disadvantaged businesses” can apply. When you read further down, it seems that they classify these businesses by their low working capital; one of the main items looked at when reviewing a contractor’s surety capacity.

Fortunately, it does allow the SBA bonded contractors to apply. However, SBA contractors’ bond lines are often reduced due to their lines of credit being reduced or terminated (SBA counts LOCs as working capital).

In other words, the government is willing to provide stimulus funds to refund contractors’ bond premiums, but only for contractors that don’t actually qualify for surety bonding.

SB1289, enacted on April 28, 2008 and made effective October 10, 2008, created flood protection districts and a Board of Directors for each district to construct flood protection facilities. The new law states that performance and payment bonds are required for any construction, and clarifies the process for claims against the performance and payment bonds. The surety has 60 days to act upon a contractor found to be in default by the board or the board may re-let the contract. If the costs to complete the project surpass the finances available for payment, the defaulting contractor’s surety has 20 days after mailing of the notice to satisfy the board’s demand for payment of the difference. This demand cannot be more then the penal sum of the bond, and monies must be used to pay for the costs of completing the work. Delivery of writ may be served on the Surety’s principal office or it’s Attorney-In-Fact. If there is no office or Attorney-In-Fact, it may be service on the insurance commissioner.