"We Are in a Heap of Trouble"

By Joelle Attinger/Boston

Like a giant vessel left ashore by the tide, the Seabrook nuclear power plant sits forlornly on the marshy New Hampshire coastline. The reactor has produced not a single kilowatt of electricity -- nor a penny of income -- since ground was broken for the project in 1976. Result: Seabrook is generating a financial disaster for its principal owner, Public Service of New Hampshire, an otherwise healthy electric utility that has poured $2.1 billion into the plant. Strapped for cash, Public Service last week did something that utilities virtually never do: it defaulted. The company deliberately missed a $37.5 million semiannual interest payment on nearly a third of its $1.5 billion debt. Not since the Great Depression had a major investor-owned utility failed to meet its bond commitments. "We are in a heap of trouble," admits Robert Harrison, Public Service's president.

The utility has a 30-day grace period, which ends in mid-November, to correct its default. If it fails to do so, creditors could push Public Service into bankruptcy and reorganization. The company would then become the first U.S. utility to succumb financially to the nuclear-plant cost overruns and environmental battles that have plagued dozens of plants across the country. Even the $2.25 billion default of the Washington Public Power Supply System in 1983 failed to knock out any utilities, largely because WPPSS was a consortium in which the financial burden was shared by 16 companies. But the weight of Seabrook falls hard on Public Service, which owns 35.6% of the plant and is prohibited under New Hampshire law from charging customers for the inoperative plant. The next biggest owner is Connecticut's United Illuminating, with 17.5%.

The Seabrook project has been troubled from the day its plans were announced in 1972. The plant was originally budgeted at $973 million and scheduled to operate by 1979, but Seabrook's cost has reached $5.5 billion, and the opening has been repeatedly postponed because of construction delays and environmental protests. Seabrook came within a few months of being started up last year, when it suffered another setback: Chernobyl. The meltdown at the Soviet nuclear plant in April 1986 prompted Democratic Governor Michael Dukakis of Massachusetts to block the opening by refusing to participate in an evacuation plan for the area within a ten-mile radius of the plant. Last week, however, the Nuclear Regulatory Commission's staff recommended a controversial change in federal rules that would allow such plants to proceed over the objections of neighboring officials.

That will bring no immediate help for Public Service, which is battling with dissident creditors over rescue plans. A group of bond owners (estimated holdings: $200 million) led by New York City Investor Martin Whitman is proposing to spin off Public Service's share in Seabrook into a separate company, thus leaving the utility less encumbered by debt. Losing Seabrook, however, is anathema to the utility, which still hopes to reap the hefty return that an operating nuclear plant can deliver. Public Service's Harrison proposes to restructure the debt, slash the utility's costs and raise electric rates by 15%. Rather than adopt the dissident plan as it stands now, Harrison claims, he would accept bankruptcy. Under court protection, he says, the utility might be able to carry out its own rescue strategy and keep its stake in Seabrook.

But the utility's rate-hike plan, which may not gain approval from state regulators, is unlikely to win Seabrook any new friends. The proposal would give Public Service the highest residential electricity rates among the 20 utility companies in New England.