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Southern : Georgia Power Persists on Project -- WSJ

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09/01/2017 | 08:48am CET

Unlike competitors, company will continue with nuclear-plant expansion despite cost

By Peg Brickley 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (September 1, 2017).

Georgia Power Co. Thursday told state regulators it wants to continue the Vogtle nuclear power plant expansion in spite of sharply higher estimates of the cost to complete the project.

The recommendation from the Southern Co. subsidiary to the Georgia Public Service Commission means that at least part of the new wave of nuclear construction in the U.S. might be salvaged. Recently, owners of a plant in South Carolina abruptly halted construction of two new nuclear reactors due to cost overruns.

Georgia Power said Thursday that the total capital cost of the project is now expected to be about $19 billion, compared with an estimate of $9.7 billion in 2008. That figure doesn't include financing costs.

Georgia Power Chief Executive Paul Bowers said the company took the long view in analyzing whether to move ahead or walk away from the Vogtle expansion. Once complete, the two new nuclear units will be in service for 60 to 80 years, he said.

"There are naysayers in the marketplace but they are looking at it in the short-term perspective," Mr. Bowers said. Completing both Vogtle reactors, rather than scuttling the project or converting it to another power source, emerged as the best option for long-term customer interests, he said.

Even with the added costs, Georgia Power believes the Vogtle expansion will have a lower impact on rates than was originally forecast back when the project was initially approved, he said.

Plant Vogtle in Georgia and V.C. Summer in South Carolina were supposed to be the leading edge of the next generation of nuclear reactors in the aging U.S. nuclear power fleet. They are years behind schedule and billions of dollars over budget, and main contractor Westinghouse Electric Co. has filed for bankruptcy. Late last month, owners abandoned work on the half-built South Carolina project, due to swelling costs.

Georgia Power projects it will complete one of the new units at the Vogtle plant by November 2021, and the other a year later.

The new timeframe adds about 29 months to the earlier approved schedule, said Stephen Kuczynski, CEO of Southern Nuclear Operating Co., which has taken over management of the project.

Mr. Kuczynski said the recommendation to complete construction on the expansion saves about 6,000 jobs. When owners of the South Carolina nuclear expansion project pulled the plug, Southern Nuclear was able to pick up new talent for the Georgia project, he said.

Thursday's filing initiates a review process by Georgia regulators, who must approve additional spending on the Vogtle nuclear expansion. A decision is expected by February 2018. While there are no guarantees, Mr. Bowers said Georgia regulators have expressed a "bias to go forward if it is in the best interests of customers."

Both the Georgia and South Carolina nuclear projects were taken over by owners after contractor Westinghouse, developer of the AP1000 nuclear technology being used in the reactors, filed for bankruptcy protection and exited from the construction business.

Georgia Power has a 45.7% share of the Vogtle plant project, and had continued expansion activities under an arrangement with Westinghouse. It is counting on guarantees from Westinghouse parent Toshiba Corp. to cover part of the added cost to complete the expansion.

Toshiba's guarantee of Westinghouse's obligations to the Georgia power plant owners is significantly larger than the guarantee extended to the owners of the South Carolina plant, Mr. Bowers said. Additionally, Georgia Power has a larger customer base to absorb the rate impact.

The owners of the new nuclear reactor projects in Georgia and South Carolina fear what could happen to the guarantees in the event of a Toshiba bankruptcy. Thursday, Georgia Power unveiled a term sheet with other owners of the Vogtle project that provides, among other things, that, in the event of a Toshiba bankruptcy, owners of at least 90% of the new units must vote to continue construction.

Regulators previously approved $5.7 billion in capital costs for Georgia Power's share of the project. Georgia Power is counting on $1.7 billion from Toshiba, but estimates it will have to come up with an additional $1.4 billion in capital costs to finish the work.

Write to Peg Brickley at [email protected]

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