BRADENTON, Fla. — A new construction delay and cost overrun in the two new nuclear units being built at the Virgil C. Summer Nuclear Station are a credit negative for the South Carolina Public Service Authority, Moody's Investors Service said Monday.
The authority, also known as Santee Cooper, owns 45% of the units. The units are being constructed by investor-owned South Carolina Electric & Gas Co., or SCE&G, which owns 55% of the project. The delay and higher cost is also a credit negative for SCE&G.
Santee Cooper had $5.6 billion of outstanding revenue bonds as of October 2012, according to Moody's. The bonds are rated Aa3 by Moody's, and AA-minus by Fitch Ratings and Standard & Poor's.
The public utility, which is owned by the state of South Carolina, also has an extensive commercial paper program used largely for capital expenses related to nuclear construction costs.
According to Moody's, South Carolina Electric last week disclosed problems with the delivery of parts being fabricated by Chicago Bridge & Iron Co., which comprises the contractor consortium along with Westinghouse Electric Co.
The delay will extend the expected completion date for the new units by nine to 12 months and is estimated to increase costs by $365 million, which translates into $200 million for South Carolina Electric and $165 million for Santee Cooper, Moody's said.
"However, the delay and higher costs remain within the scope we envisioned when SCE&G and Santee Cooper first embarked on this project, and do not affect the co-owners' current ratings," said Moody's analyst Bill Hunter.
Before this latest delay, the project's total cost was $10.6 billion, including associated transmission upgrades.
In order to recover the additional construction cost in electric rates, SCE&G will need the South Carolina Public Service Commission's approval since there is no construction contingency, Hunter said. Santee Cooper can increase rates without Public Service Commission approval.
Santee Cooper currently is working to reduce its ownership in the project to 20%.
Those efforts could be challenged by delays and cost overruns, said Hunter, who added that reducing the percentage of ownership is "critical to the maintenance of Santee Cooper's current ratings."