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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--The long-delayed completion of a two-unit addition to the Alvin W. Vogtle Nuclear Power Station has been delayed yet again, and at least one of the co-owners may invoke a 2018 cost-sharing agreement under which Georgia Power would be responsible for cost overruns beyond a certain point.
First announced in an October 21 filing with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.), and then confirmed November 4 during an earnings call with corporate parent Southern Company (NYSE:SO) (Atlanta, Georgia), the latest delay will push back the start of units 3 and 4 by three months each--to the third quarter of 2022 for Unit 3 and the second quarter of 2023 for Unit 4. Both units feature the Westinghouse Advanced Passive 1000 reactor. When operating, the two new units will have about 2,234 megawatts (MW) of electric generating capacity. Construction is nearly complete on the two units in Waynesboro, Georgia.
The delay is mainly due to "the need for additional time to address continued construction challenges, and to allow for the comprehensive testing necessary to ensure quality and safety standards are fully met," Georgia Power said in a press release October 21.
"As we've said from the beginning of this project, we are going to build these units the right way, without compromising safety and quality to achieve a schedule deadline," said Chris Womack, Georgia Power's chief executive officer, in the release.
In its November 4 earnings call, Southern Company officials said Georgia Power's share of the capital construction costs increased $264 million, to $9.5 billion. The new cost estimate caused Southern Company to take an after-tax charge of $197 million.
That third-quarter charge is added to the $379 million in after-tax charges taken after the first and second quarters of 2021.
Georgia Power's share of the capital costs is about $2.3 billion over the $7.3 billion in costs that were deemed reasonable by the Georgia Public Service Commission (GPSC) (Atlanta) in 2017, according to Fitch Ratings (New York, New York). The credit-rating agency did not lower its rating on bonds issued by the utility or its corporate parent after the delays were announced.
This was the fourth time this year the project's completion date has been pushed back. In early 2021, Georgia Power predicted Unit 3 would be operating by the end of this year. For more on the project's recent challenges, see June 8, 2021, article - Georgia PSC Staff: New Vogtle Nuclear Units to be Later than Expected, Cost $2.4 Billion More than Projected.
The new delays will push the project's overall price tag to an estimated $28.5 billion, more than double the $14 billion the unit additions were estimated to cost when construction began in 2012. Back then, the plan was for new units to begin operating in late 2017.
The project has had numerous challenges, not the least of which were: the Chapter 11 bankruptcy of Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania); changing engineering, procurement and construction (EPC) firms; and four waves of the COVID-19 pandemic, which made it harder and more expensive to find skilled craft labor. Vogtle units 3 and 4 also are the first new-build nuclear reactors in the U.S. in three decades. The project also underwent construction remediation work following a safety inspection by the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) over the summer.
In a November 4 interview with S&P Global, Southern Company Chairman, President and Chief Executive Officer Tom Fanning said, "What we said to everybody was, 'We (are going to) open up the hood of the car, we look at the engine and we do a comprehensive walk down of the rest of the site.'"
The company found more "punch-list items than what we expected," Fanning said. "Nothing major, but we have to deal with them. In the nuclear world, there's no such thing as a small issue."
Fanning also said the company has seen lower productivity onsite than expected, with more attrition than he hoped for among electricians, engineers and site supervisors.
Vogtle units 3 and 4 are owned by Georgia Power (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%).
In 2018, the owners agreed to a cost-sharing arrangement under which Georgia Power would pick up some or all of the cost overruns above a certain project cost. On the November 4 earnings call, Fanning said there has been "some discussion" with other co-owners about cost sharing, but did not disclose any details.
News outlets have reported that the other three owners of the Vogtle project believe the latest cost overruns have triggered the 2018 cost-sharing agreement. Those reports also said that Georgia Power said that the owners have entered into another agreement to resolve their differences. The statement said, "the Unit 3 and 4 co-owners have some differences of opinions on how to interpret the agreement we entered into in 2018."
The utility adds that the differences are "primarily around the starting point for calculating the level of sharing costs, and the treatment of COVID costs," according to the statement. Of the ongoing talks, Georgia Power's statement added that "all parties are working constructively" to resolve their differences.
On November 5, Fitch Managing Director Shalini Mahajan said the agency "will monitor Georgia Power's discussion with co-owners. The 2018 co-owner agreement places a disproportionate share of cost overruns on Georgia Power. Specifically, if the estimated cost to complete (exceeds) $8.4 billion for Georgia Power, the co-owners have an option to tender a portion of their ownership interest to Georgia Power, and Georgia Power will fund all the excess costs. If costs increase between $800 million and $2.1 billion, Georgia Power's allocation of the increased costs above its proportional share would be approximately $180 million. Georgia Power is disputing the co-owners' assertion that the estimated costs have reached a level to trigger tender."
Industrial Info was unable to reach officials at Southern Company officials last Friday.
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.
First announced in an October 21 filing with the U.S. Securities and Exchange Commission (SEC) (Washington, D.C.), and then confirmed November 4 during an earnings call with corporate parent Southern Company (NYSE:SO) (Atlanta, Georgia), the latest delay will push back the start of units 3 and 4 by three months each--to the third quarter of 2022 for Unit 3 and the second quarter of 2023 for Unit 4. Both units feature the Westinghouse Advanced Passive 1000 reactor. When operating, the two new units will have about 2,234 megawatts (MW) of electric generating capacity. Construction is nearly complete on the two units in Waynesboro, Georgia.
The delay is mainly due to "the need for additional time to address continued construction challenges, and to allow for the comprehensive testing necessary to ensure quality and safety standards are fully met," Georgia Power said in a press release October 21.
"As we've said from the beginning of this project, we are going to build these units the right way, without compromising safety and quality to achieve a schedule deadline," said Chris Womack, Georgia Power's chief executive officer, in the release.
In its November 4 earnings call, Southern Company officials said Georgia Power's share of the capital construction costs increased $264 million, to $9.5 billion. The new cost estimate caused Southern Company to take an after-tax charge of $197 million.
That third-quarter charge is added to the $379 million in after-tax charges taken after the first and second quarters of 2021.
Georgia Power's share of the capital costs is about $2.3 billion over the $7.3 billion in costs that were deemed reasonable by the Georgia Public Service Commission (GPSC) (Atlanta) in 2017, according to Fitch Ratings (New York, New York). The credit-rating agency did not lower its rating on bonds issued by the utility or its corporate parent after the delays were announced.
This was the fourth time this year the project's completion date has been pushed back. In early 2021, Georgia Power predicted Unit 3 would be operating by the end of this year. For more on the project's recent challenges, see June 8, 2021, article - Georgia PSC Staff: New Vogtle Nuclear Units to be Later than Expected, Cost $2.4 Billion More than Projected.
The new delays will push the project's overall price tag to an estimated $28.5 billion, more than double the $14 billion the unit additions were estimated to cost when construction began in 2012. Back then, the plan was for new units to begin operating in late 2017.
The project has had numerous challenges, not the least of which were: the Chapter 11 bankruptcy of Westinghouse Electric Corporation LLC (Cranberry Township, Pennsylvania); changing engineering, procurement and construction (EPC) firms; and four waves of the COVID-19 pandemic, which made it harder and more expensive to find skilled craft labor. Vogtle units 3 and 4 also are the first new-build nuclear reactors in the U.S. in three decades. The project also underwent construction remediation work following a safety inspection by the U.S. Nuclear Regulatory Commission (NRC) (Rockville, Maryland) over the summer.
In a November 4 interview with S&P Global, Southern Company Chairman, President and Chief Executive Officer Tom Fanning said, "What we said to everybody was, 'We (are going to) open up the hood of the car, we look at the engine and we do a comprehensive walk down of the rest of the site.'"
The company found more "punch-list items than what we expected," Fanning said. "Nothing major, but we have to deal with them. In the nuclear world, there's no such thing as a small issue."
Fanning also said the company has seen lower productivity onsite than expected, with more attrition than he hoped for among electricians, engineers and site supervisors.
Vogtle units 3 and 4 are owned by Georgia Power (45.7%), Oglethorpe Power Corporation (Tucker, Georgia) (30%), Municipal Electric Authority of Georgia (Atlanta) (22.7%) and Dalton Utilities (Dalton, Georgia) (1.6%).
In 2018, the owners agreed to a cost-sharing arrangement under which Georgia Power would pick up some or all of the cost overruns above a certain project cost. On the November 4 earnings call, Fanning said there has been "some discussion" with other co-owners about cost sharing, but did not disclose any details.
News outlets have reported that the other three owners of the Vogtle project believe the latest cost overruns have triggered the 2018 cost-sharing agreement. Those reports also said that Georgia Power said that the owners have entered into another agreement to resolve their differences. The statement said, "the Unit 3 and 4 co-owners have some differences of opinions on how to interpret the agreement we entered into in 2018."
The utility adds that the differences are "primarily around the starting point for calculating the level of sharing costs, and the treatment of COVID costs," according to the statement. Of the ongoing talks, Georgia Power's statement added that "all parties are working constructively" to resolve their differences.
On November 5, Fitch Managing Director Shalini Mahajan said the agency "will monitor Georgia Power's discussion with co-owners. The 2018 co-owner agreement places a disproportionate share of cost overruns on Georgia Power. Specifically, if the estimated cost to complete (exceeds) $8.4 billion for Georgia Power, the co-owners have an option to tender a portion of their ownership interest to Georgia Power, and Georgia Power will fund all the excess costs. If costs increase between $800 million and $2.1 billion, Georgia Power's allocation of the increased costs above its proportional share would be approximately $180 million. Georgia Power is disputing the co-owners' assertion that the estimated costs have reached a level to trigger tender."
Industrial Info was unable to reach officials at Southern Company officials last Friday.
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.
