BRADENTON, Fla. – Financial problems at Toshiba Corp. pose risks for new nuclear units in Georgia and South Carolina, where a number of municipal power agencies issued bonds to finance their costs of the projects.
Toshiba's declining credit quality has incrementally increased credit risk at Plant Vogtle and VC Summer where Georgia Power Co. and South Carolina Electric and Gas Co. are building new nuclear plants, Moody's Investors Service said Wednesday.
Analysts said the firm's fiscal difficulties are credit negative for both nuclear projects, whose major municipal power agency shareholders are the Municipal Electric Authority of Georgia and South Carolina Public Service Authority, also known as Santee Cooper.
Toshiba is the parent company of Westinghouse Electric Co., the engineering, procurement and construction contractor for the new units under construction at both nuclear plants.
MEAG owns 22.7% of two new units at Plant Vogtle and projects that its total financing costs will be about $4.7 billion.
Santee Cooper is a 45% owner in two new units at VC Summer and estimates its costs will be about $5.1 billion.
Moody's assigns A1 ratings to the senior lien bonds issued by MEAG and Santee Cooper.
According to Toshiba, Westinghouse found that the cost to complete its U.S. nuclear projects will far surpass original estimates mainly due to increases in key project parameters that will result in far lower asset value than originally determined, Moody's said.
The company now believes its goodwill impairment will exceed its December 2015 estimate of $87 million by several billion dollars, and plans to announce a better estimate in its third quarter results in mid-February, according to Moody's.
Analysts said there are long-term risks with regard to Toshiba's continued commitment to its U.S. nuclear business due to the fact that it has been the source of the latest impairment loss.
"While it is still too early to determine the future of Toshiba's nuclear business," the analysts said, "any exit or sale of this business could have adverse consequences for the Vogtle and VC Summer projects by potentially introducing a new party into the process while two projects are less than 50% constructed."
Even if Toshiba decides to keep its U.S. nuclear business, Moody's said a financially constrained company could make additional costs and disputes with Westinghouse more difficult to resolve, or could result in additional project delays if there are insufficient funds available to maintain project schedules.
