Plans to expand the South Texas Project nuclear power plant appear to be back on track after a legal truce between partners.

In late January, investors were warned that the project would be abandoned without agreement between then 50% stakeholder CPS Energy and the other developer Nuclear Innovation North America — a partnership between NRG Energy and reactor provider Toshiba.

CPS had wanted to withdraw from the project, triggering a dispute over ownership that escalated enough to threaten this development as well as any future plans for the South Texas Project site. Yesterday’s deal means that CPS will reduce its shareholding to 7.625%, leaving Nina with 92.375% and full control of the project and free to find other partners.

The CPS share is in line with its investment to date of over $300 million that covered half of development costs up until the end of January. From now on all costs — to the order of $10 billion — are to be met by Nina.

Nina will also take a corresponding majority of the 2600 MWe that the new reactors will produce, with just 200 MWe going to CPS. Nina is also to make two $40 million payments to CPS after gaining a loan guarantee with its support and put $10 million into a local non-profit energy partnership led by CPS.

Nina announced that Nuclear Regulatory Commission approval of for a combined construction and operating license, and a ’full notice to proceed’ are anticipated in 2012. At that point, the engineering procurement and construction contract with Toshiba “converts to a lump-sum turnkey contract with customary warranties, performance and schedule guarantees and liquidated damage provisions.”

In January, NRG chief David Crane said Toshiba and Fluor “are on track for a number below $10 billion” for the two Advanced Boiling Water Reactors.

Back from the brink

Nina promotes its project as among the most promising in the USA in that it is based on a ready-certified design that has been operating well overseas for more than ten years. It claims to be among the front-runners for loan guarantee support from the US Department of Energy.

However, the legal battle over how CPS could reduce its involvement in the project put this status in such jeopardy that NRG warned of shelving the entire project and apologised for trusting CPS.

Legal arrangements for the existing STP power plant granted existing partners a right to an equivalent share of any further development on the site. That meant NRG had a right to hold 44%, CPS could take 40%, and the City of Austin, 6%.

When new build was first discussed, Austin declined to take part and great enthusiasm from CPS saw it enter a 50–50 partnership with NRG Energy. But CPS’s analysts had been overly optimistic and the firm later decided it wanted to reduce shareholding. Soon after, its governors vetoed a vital bond issue and an internal investigation began into executive knowledge of cost estimates.

At that point a legal war began with CPS looking to withdraw from the project while demanding $32 billion in damages and NRG angry that CPS had signed and invested without the endorsement of San Antonio City Council.

This reached a legal dead end when CPS demanded to cease payments for development yet retain 50% control of the new reactors as well as any future ones. In this impossible situation, a judge declined to rule on the matter and told the firms to find a way forward on their own.

Steve Winn of Nina said the resolution was of “tremendous importance” and means there are “no conflicts preventing new partners from joining the project.”

Both sides thanked Texas Public Utility Commission chairman Barry Smitherman for facilitating their discussions and Nina added that it was looking forward to working with public officials to secure the loa