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Researched by Industrial Info Resources (Sugar Land, Texas)--Southern Company (NYSE:SO) (Atlanta, Georgia) will take a month or two to evaluate whether to advance or abandon the beleaguered Alan W. Vogtle nuclear power plant project in Georgia, in the wake of the Chapter 11 bankruptcy filing by project contractor Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania). But executives with Southern Company say the power provider would be well positioned to manage the project if it moves forward. Meanwhile, work will continue on the two nuclear units, pending a decision on their fate.
Westinghouse, the engineering, procurement and construction (EPC) contractor for the $16.2 billion project, declared bankruptcy on March 29, leaving the fate of the project uncertain. The project has seen massive cost overruns and delays. Westinghouse has said it will continue work on Vogtle units 3 and 4 during an "initial assessment period" that has been extended to May 12, but has indicated in bankruptcy court that it wants to reject its EPC contract. For related information, see Industrial Info's project report and April 25, 2017, article - Westinghouse Chapter 11 Filing Roils Labor Markets in Georgia and Beyond.
Southern Company Chief Executive Officer Thomas Fanning said during the company's first-quarter earnings presentation that as a result of the interim assessment agreement, approximately 6,000 workers have remained on site, adding that the project has seen productivity improvements since the last earnings report.
"We are working on an agreement with Westinghouse that would allow work to continue, even if the current EPC contract is rejected as part of the bankruptcy proceedings," Fanning said. "The limitations on Westinghouse's execution of the project imposed by the bankruptcy create uncertainties that are not good for the project, especially over an extended period of time. If Westinghouse is not committed to performing under the EPC contract, Southern Company is well positioned to manage the site."
Fanning said Southern Company is "pretty unique in being able to fulfill these kind of obligations." Southern Company has been involved in supply chain efforts surrounding the project, with more than 400 people who have been engaged in overseeing the work. "We won't have to go grab bodies [for the project], if in fact that is the course we decided to take."
Ultimately, Fanning continued, Southern Company and its subsidiary, Georgia Power, intend to "make a fully informed recommendation to its regulators within the next month or two. It is possible that we will need more time to ensure we have the best information possible and to reach consensus."
He cautioned that even when a recommendation is made, "this will be the beginning of a regulatory process that does not yet have a definitive timeframe."
Continuation of the project is costing roughly $200 million a month. Westinghouse's parent company, Toshiba Corporation (Tokyo, Japan) has made a $3.68 billion payment guarantee for the project. One item that will be central in the decision process is whether Congress and President Donald Trump's administration agrees to extend the deadline for a production tax credit for new nuclear power plants. Under the current deadline, such plants must come online before 2020 in order to qualify the tax credit.
"The most obvious thing is to extend the time frame on the production tax credit," Fanning said, adding that it is not just an issue for the Vogtle project, but is "a national security issue."
Fanning added that the Trump administration and Congress seem to support an extension of the tax credit deadline.
Southern Company reported first-quarter 2017 earnings of $658 million, compared with $489 million in first-quarter 2016. Earnings drivers for the year-over-year improvement included the acquisition of Southern Company Gas in 2016 and other factors.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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/.
Westinghouse, the engineering, procurement and construction (EPC) contractor for the $16.2 billion project, declared bankruptcy on March 29, leaving the fate of the project uncertain. The project has seen massive cost overruns and delays. Westinghouse has said it will continue work on Vogtle units 3 and 4 during an "initial assessment period" that has been extended to May 12, but has indicated in bankruptcy court that it wants to reject its EPC contract. For related information, see Industrial Info's project report and April 25, 2017, article - Westinghouse Chapter 11 Filing Roils Labor Markets in Georgia and Beyond.
Southern Company Chief Executive Officer Thomas Fanning said during the company's first-quarter earnings presentation that as a result of the interim assessment agreement, approximately 6,000 workers have remained on site, adding that the project has seen productivity improvements since the last earnings report.
"We are working on an agreement with Westinghouse that would allow work to continue, even if the current EPC contract is rejected as part of the bankruptcy proceedings," Fanning said. "The limitations on Westinghouse's execution of the project imposed by the bankruptcy create uncertainties that are not good for the project, especially over an extended period of time. If Westinghouse is not committed to performing under the EPC contract, Southern Company is well positioned to manage the site."
Fanning said Southern Company is "pretty unique in being able to fulfill these kind of obligations." Southern Company has been involved in supply chain efforts surrounding the project, with more than 400 people who have been engaged in overseeing the work. "We won't have to go grab bodies [for the project], if in fact that is the course we decided to take."
Ultimately, Fanning continued, Southern Company and its subsidiary, Georgia Power, intend to "make a fully informed recommendation to its regulators within the next month or two. It is possible that we will need more time to ensure we have the best information possible and to reach consensus."
He cautioned that even when a recommendation is made, "this will be the beginning of a regulatory process that does not yet have a definitive timeframe."
Continuation of the project is costing roughly $200 million a month. Westinghouse's parent company, Toshiba Corporation (Tokyo, Japan) has made a $3.68 billion payment guarantee for the project. One item that will be central in the decision process is whether Congress and President Donald Trump's administration agrees to extend the deadline for a production tax credit for new nuclear power plants. Under the current deadline, such plants must come online before 2020 in order to qualify the tax credit.
"The most obvious thing is to extend the time frame on the production tax credit," Fanning said, adding that it is not just an issue for the Vogtle project, but is "a national security issue."
Fanning added that the Trump administration and Congress seem to support an extension of the tax credit deadline.
Southern Company reported first-quarter 2017 earnings of $658 million, compared with $489 million in first-quarter 2016. Earnings drivers for the year-over-year improvement included the acquisition of Southern Company Gas in 2016 and other factors.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 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/.
