Reports related to this article:
Project(s): View 1 related project in PECWeb
Plant(s): View 1 related plant in PECWeb
en
Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The board of directors of Oglethorpe Power Corporation (OPC) (Tucker, Georgia) on Wednesday voted to continue constructing two new nuclear units at the Alvin W. Vogtle Nuclear Power Station, joining other owners Georgia Power Company (Atlanta, Georgia), the Municipal Electric Authority of Georgia (MEAG Power) (Atlanta) and Dalton Utilities (Dalton, Georgia).
Wednesday's vote by OPC reversed its vote from two days earlier when it conditioned its support for continuing construction on adoption of cost-cap measures, one of which would have made any future cost overruns the exclusive responsibility of Georgia Power Company, a condition Georgia Power rejected. Georgia Power, a subsidiary of Southern Company (NYSE:SO) (Atlanta, Georgia), owns 45.7% of the new units. OPC owns 30%, MEAG Power owns 22.7% and Dalton Utilities owns 1.6%. Aside from Oglethorpe, all of Vogtle's other owners had agreed to continue construction without imposing any conditions.
A vote on whether to continue construction was required because of a recent cost overrun of about $2.3 billion, which pushed the overall cost of the two new nuclear units to over $27 billion. For more on the background to Wednesday's vote, see September 25, 2018 article - Oglethorpe Power Imposes Conditions on its Vogtle Vote and August 10, 2018, article - Vogtle Costs Increase $2.3 Billion, Cancellation is Possible.
In a joint statement issued Wednesday afternoon, the four owners said, "We are all pleased to have reached an agreement and to move forward with the construction of Vogtle units 3 & 4, which is critical to Georgia's energy future. While there have been and will be challenges throughout this process, we remain committed to a constructive relationship with each other and are focused on reducing project risk and fulfilling our commitment to our member-consumers."
All four owners adopted measures to mitigate financial risk going forward, summarized in separate 8-K filings made Wednesday with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.).
The 8-K jointly filed by Southern Company and Georgia Power on September 26 outlined a new approach to treating future cost overruns:
Georgia Power, the principal owner and operator of Vogtle units 3 and 4, has faced tough regulatory scrutiny as estimated construction costs have risen and in-service dates have been pushed back. For more on that, see December 22, 2017, article - Georgia Power Authorized to Complete Construction of Vogtle Units 3 and 4 and September 1, 2017, article - Georgia Power Recommends Construction Continue at Vogtle. When the nuclear project was being developed over a decade ago, natural gas prices were far higher than they are today. The shale revolution had not yet begun, and wind and solar generation costs had not yet begun their sharp declines.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
Wednesday's vote by OPC reversed its vote from two days earlier when it conditioned its support for continuing construction on adoption of cost-cap measures, one of which would have made any future cost overruns the exclusive responsibility of Georgia Power Company, a condition Georgia Power rejected. Georgia Power, a subsidiary of Southern Company (NYSE:SO) (Atlanta, Georgia), owns 45.7% of the new units. OPC owns 30%, MEAG Power owns 22.7% and Dalton Utilities owns 1.6%. Aside from Oglethorpe, all of Vogtle's other owners had agreed to continue construction without imposing any conditions.
A vote on whether to continue construction was required because of a recent cost overrun of about $2.3 billion, which pushed the overall cost of the two new nuclear units to over $27 billion. For more on the background to Wednesday's vote, see September 25, 2018 article - Oglethorpe Power Imposes Conditions on its Vogtle Vote and August 10, 2018, article - Vogtle Costs Increase $2.3 Billion, Cancellation is Possible.
In a joint statement issued Wednesday afternoon, the four owners said, "We are all pleased to have reached an agreement and to move forward with the construction of Vogtle units 3 & 4, which is critical to Georgia's energy future. While there have been and will be challenges throughout this process, we remain committed to a constructive relationship with each other and are focused on reducing project risk and fulfilling our commitment to our member-consumers."
All four owners adopted measures to mitigate financial risk going forward, summarized in separate 8-K filings made Wednesday with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.).
The 8-K jointly filed by Southern Company and Georgia Power on September 26 outlined a new approach to treating future cost overruns:
- If the actual completion costs come in at or below the estimate contained in the 19th Vogtle Construction Monitoring report, all owners would be responsible for their proportionate share of costs plus their share of an additional $800 million in added construction costs that the members already had agreed to accept.
- If actual costs exceeded estimated costs by between $800 million and $1.6 billion, Georgia Power would be required to pay for 55.7% of those cost overruns.
- If actual completion costs outstripped estimated costs by between $1.6 billion and $2.1 billion, Georgia Power would be responsible for 66.7% of the overruns.
- If actual costs are more than $2.1 billion over the estimated cost, each member of the ownership group will have a one-time option to sell some of its ownership to Georgia Power, but that utility would have the option of cancelling construction of the two units instead of purchasing shares from the other owners.
Georgia Power, the principal owner and operator of Vogtle units 3 and 4, has faced tough regulatory scrutiny as estimated construction costs have risen and in-service dates have been pushed back. For more on that, see December 22, 2017, article - Georgia Power Authorized to Complete Construction of Vogtle Units 3 and 4 and September 1, 2017, article - Georgia Power Recommends Construction Continue at Vogtle. When the nuclear project was being developed over a decade ago, natural gas prices were far higher than they are today. The shale revolution had not yet begun, and wind and solar generation costs had not yet begun their sharp declines.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
