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The Impact of Nuclear Power on the Systematic Risk and Market Value of Electric Utility Common Stock

Russell l. Fuller, George W. Hinman and Thomas C. Lowinger

Year: 1990
Volume: Volume 11
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol11-No2-7
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Abstract:
The objective of this study is to determine whether investors perceive utilities with nuclear plants to be more risky than utilities with no nuclear facilities. Two basic analytical frameworks are used. One approach is to analyze investors' differential perception of the market-related systematic risk of nuclear utility stocks versus non-nuclear utility stocks. This is done by comparing the betas of nuclear versus non-nuclear utility stocks. The second approach is an econometric treatment of price to book value ratios, using cross-sectional data in the time period 1973 to 1987. For both approaches, the differences in the financial markets' perception of risk, related to the special events of TMI, Chernobyl and the WPPSS bond default; are analyzed. Based on the cross-sectional analysis of P/BV ratios in recent years, we estimate the financial markets valued nuclear power utilities at approximately 20% less than comparable non-nuclear utilities. We estimate that a 3% increase in the allowed rate of return for nuclear utilities (from 13.7% to 16.7% in 1988) would have been necessary to fully offset the discount associated with nuclear power.



Chapter 8 - Applying Construction Lessons to Decommissioning Estimates

Robin Cantor

Year: 1991
Volume: Volume 12
Number: Special Issue
DOI: 10.5547/ISSN0195-6574-EJ-Vol12-NoSI-8
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Abstract:
One of the standard practices in estimating costs for new procedures is to apply past experience. In this chapter, Robin Cantor uses prudency hearings and other data from power plant construction to illuminate some of the pitfalls likely to be encountered in preparing estimates for power plant decommissioning. Two of the most tempting pitfalls are scale and learning economies. She suggests that these presumed economies have had less impact on keeping construction costs down than expected, and that they also are unlikely to have much effect on decommissioning costs. Ignoring such evidence, she suggests, could result in decommissioning cost estimates that are too low and collection strategies that are inadequate. This finding has implications for future generations and future decommissioning options.





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