Former Chattanooga developer Franklin L. Haney was ready to close on his $111 million purchase of an abandoned Tennessee Valley Authority nuclear power plant in Alabama on Friday and become the first individual investor to own a commercial nuclear plant.

Document Read letter Franklin Haney's attorney sent to TVA disputing refusal to sell Bellefonte View

But before Haney could move ahead with trying to finish the biggest construction project in Alabama history, TVA pulled the plug on the pending sale Friday night, claiming the utility couldn't sell its Bellefonte Nuclear Power Plant until Haney's Nuclear Development LLC got regulatory approval to transfer the construction permits on the unfinished nuclear units.

"We were unable to complete the transaction today," TVA spokesman Jim Hopson said Friday night. "Nuclear Development did not complete the necessary NRC license transfer prior to the closing date as required by the Atomic Energy Act."

Although Haney asked TVA to extend the purchase option while regulators review his license transfer application, Hopson said TVA declined to provide any contract extension "beyond the nearly 25 months already provided" to Haney. Hopson blamed the failure to close the sale on a "lack of diligence in completing these required activities" by Haney's Nuclear Development LLC.

"We remain committed to returning the Bellefonte property to productive use to benefit the residents of northeastern Alabama as soon as possible," Hopson said.

Haney submitted his application to the U.S. Nuclear Regulatory Commission to take over the construction permit for Bellefonte earlier this month. But NRC spokesman Scott Burnell said the regulatory staff is still reviewing the request and license transfers typically take six months for approval.

"Right before the closing, TVA tells me that they can't close the deal, but our attorneys don't agree," Haney said Friday as he filed a federal lawsuit against TVA asking the court to order TVA to complete the sale. "Nobody told us there was any problem before now. It just doesn't seem to make much sense."

Haney said he talked Thursday night with TVA President Bill Johnson and asked for a six-month extension of the sales agreement for the Bellefonte assets, which Haney agreed to buy when he submitted the winning bid at a TVA public auction in November 2016. Johnson agreed earlier this month to a 16-day extension of the sales agreement for Bellefonte with Haney until today, but Hopson said TVA has not agreed to another extension.

Haney, a 78-year-old real estate investor who has owned and leased properties across the country with a variety of federal agencies including TVA, said he has spent the past two years working with engineering, design and construction contractors to work out a plan to finish construction and operate the Bellefonte plant. In June, Haney hired the Montreal-based engineering firm of SNC-Lavalin to complete work on the Bellefonte plant. SNC has met and begun talks with more than two dozen nuclear contractors about working to finish Bellefonte.

Completing Bellefonte would create 8,000 to 10,000 jobs in Northeast Alabama and the Chattanooga region, and when complete within five years, the plant could produce power at $39 per megawatt-hour, or only about half of TVA's average $72 per megawatt-hour rate, Haney said.

"This is about jobs, jobs, jobs and cheaper, cleaner power," Haney said.

The millionaire investor said he is confident he can finish the reactors in five years at a $7 billion cost, or $3.5 billion per reactor — less than half what TVA projected it would cost to finish the units. Haney said he is planning on investing $500 million of his own money in the project and SNC and other builders and engineers also are investing in fixed-cost contracts for the work.

Critics question Bellefonte cost, viability

But anti-nuclear groups question how the plant could be finished after TVA gutted some of its equipment and other parts of the plant are decades old and pre-date the digital era.

"Bellefonte is like a Ford Pinto," said Stephen Smith, executive director of the Southern Alliance for Clean Energy in Knoxville. "It is an antiquated 1970s version of a nuclear plant, that is out of date, not modern, not able to be brought online. Never has this design ever received an operating license in the United States."

Most nuclear power projects, including the most recent ones built at Watts Bar, Vogtle and V.C. Summer, have all had major cost overruns during construction.

Haney has hired former TVA Chief Operating Officer Bill McCollum to help oversee the project. But Johnson noted that McCollum's staff previously estimated that Watts Bar Unit 2 — the last U.S. nuclear plant to be finished — could be finished for $2.5 billion. Instead, the Rhea County, Tennessee, reactor cost nearly $4.7 billion to finish.

McCollum said the Bellefonte developers are applying lessons from Watts Bar and hope to capitalize on the limited demand for nuclear power equipment and builders to gain discounts and fixed costs for about 70 percent of the remaining work on the plant.

Haney disputes TVA refusal to sell

MCollum said Nuclear Development LLC isn't buying a completed, operating nuclear plant that needs a license transfer, but only the equipment and assets to build the new plant and TVA has not previously indicated any concerns with the transfer of the deferred construction permit for the idled plant.

"To bid on the nuclear plant two years ago when we indicated our desire to finish the plant, you had to be a qualified bidder capable of financing and completing the deal, which we did to the satisfaction of TVA, " McCollum said.

In a letter to TVA on Friday, Chicago Attorney Larry Blust challenged TVA's assertion that the Bellefonte sale required approval for the transfer of the construction permits, both of which are now in deferred status with the NRC. The Atomic Energy Act requires owners of a nuclear "production facility" or "utilization facility" to have a license, but Blust said Bellefonte is not such a plant and before it becomes one it will be carefully reviewed by nuclear regulators.

"The Bellefonte site is years and billions of dollars from being able to meet this definition (under the Atomic Energy Act cited by TVA)," Blust said in a letter to TVA's general counsel challenging TVA's refusal to sell Bellefonte to Haney. "Moreover, the Bellefonte construction permits are in inactive deferred plant status and cannot be used to bring the site up to the status of a "facility" as required in the act until transfer is approved and the permits are activated."

Blust also claims it is TVA's responsibility, not Haney's, to transfer the license under the sales agreement Haney made in November 2016. Haney was the high bidder at a TVA public auction two years ago for the Bellefonte assets, which include 1,300 acres of riverfront property, an unfinished reactor building, offices, warehouses, two cooling towers and an electric switch yard.

Haney paid TVA $22 million for a down payment on the site in 2016. Since then, Haney says he has spent "millions and millions of dollars" to maintain the facility and hire contractors to plot a plan to finish the nuclear plant. Haney said he has the money to complete the purchase in a UBS account ready to close the agreement and had expected to do so Friday.

Haney hires Trump attorney

As a private entity, Haney's Nuclear Development LLC will qualify for $2.3 billion of federal tax credits that TVA as a government agency would not. Haney said he also is seeking up to $1 billion in state assistance from Alabama for Bellefonte, which he said is only a small portion of what the plant would bring to the state in jobs and investment over the long run.

Haney also has applied for $4.4 billion of federal loan guarantees from the U.S. Department of Energy under a program designed to spur more new nuclear power plants to be built in the United States.

Haney, who said he is a friend of President Donald Trump as a member of Trump's Mar-A-Lago resort in Palm Beach, Florida, said Trump personally mentioned to him a Qatar investment fund that was eager to invest $45 billion in U.S. properties. At the same time, Haney said he ran into Trump's then personal attorney, Michael Cohen. The conversation led to Haney hiring Cohen for $200,000 to pursue possible investments from a Qatar sovereign investment fund.

Haney said he fired Cohen in the spring after the FBI raided Cohen's home and office and a federal investigation into his work for Trump began. Cohen later pleaded guilty to eight counts of campaign finance law violations as well as tax and bank fraud.

U.S. Sen. Tammy Duckworth, D-Illinois, has asked DOE's inspector general to investigate whether Haney was improperly trying to influence the Trump administration regarding the federal loan guarantee request.

But Haney said neither Cohen nor he sought to lobby Trump about the DOE loan guarantees for Bellefonte.

DOE spokesman Jessica Szymanski said the federal energy agency "considers loan applications and the loan application process to be business sensitive information," so she declined to comment on the status of Haney's application.

Haney said he could start construction on the unit 1 reactor at Bellefonte within six months of obtaining a federal loan guarantee for the project . But he is still negotiating to finalize purchasers for the power Bellefonte would produce.

In 2015, TVA power planners concluded the utility would not need the power that Bellefonte could generate before 2033 and the TVA board voted in May 2016 to dispose of the nuclear plant site.

Haney has approached TVA's biggest customer, Memphis Light, Gas and Water, about buying Bellefonte-generated power for less than what TVA charges for its electricity. Haney claims he could cut the power bill for MLGW by $487 million a year or as much as $14 billion over 30 years.

Haney said he could help cut EPB's annual power bill in Chattanooga by $160 million, but EPB is still in a long-term exclusive purchase contract with TVA.

Under TVA's contract with EPB MLGW and the other 153 municipalities and power cooperatives in the Tennessee Valley, the TVA distributors must purchase all of their power from TVA.

U.S. Rep. Steve Cohen, a Memphis Democrat who served as Shelby County chairman of Haney's 1974 gubernatorial campaign, helped arrange a meeting this week between Haney's team and Memphis Mayor Jim Strickland.

"Memphis is one of the nation's poorest cities and accordingly its residents have a very high energy burden as measured by the percentage of their incomes they pay for electricity. Therefore any opportunity to save on this basic necessity is of the utmost importance to my constituents,'' Rep. Cohen said in a statement to the Institute for Public Service Reporting in Memphis.

The Memphis utility has hired a consultant to evaluate whether MLGW may split with TVA in the future and buy its power from other sources, including Nuclear Development and the Midcontinent Independent System Operator or MISO, a nonprofit regional power transmission organization operating in all or parts of 15 states in the West, Midwest and South, including Arkansas.

"MLGW is awaiting the results of a study on various possible energy sources. Upon receiving that study, scheduled for sometime in December, staff and I will assess those results," MLGW President and CEO J.T. Young told The Daily Memphian.

Previously, Young said he "is not inclined to pursue an agreement with an entity who has not only never generated electricity but never run a nuclear plant."

TVA officials, including Johnson, have urged Memphis officials to be wary about buying power from other unproven identities like Haney and have questioned if their rates will remain attractive over the long term.

Haney said Friday he fears that TVA's reluctance to sell Bellefonte to him reflects their concerns over him possibly offering cheaper power than TVA to consumers in the region. But Hopson said TVA "is simply following the law" and any competitive threat was not considered in the decision on the Bellefonte sale.

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.