BRADENTON, Fla. – The Municipal Electric Authority of Georgia wants to finish two nuclear reactors under construction at Plant Vogtle.
MEAG Power provided no details about what its cost will be to finish the project in a notice filed on EMMA late Wednesday, after the MEAG board voted to complete it.
The fate of Vogtle, where two Westinghouse AP1000 reactors are being constructed, has been unknown since Westinghouse filed for bankruptcy March 29.
“The board considered many factors in arriving at this decision, including [an] analysis of the estimated costs to complete Vogtle Units 3&4 as well as the estimated costs to cancel Vogtle Units 3&4,” the notice said.
MEAG owns 22.7% of the project, and has already issued $2.85 billion of taxable and tax exempt M, J, and P nuclear project bonds for its share of the work.
The new estimated cost to complete the two reactors is $9.45 billion, of which $4.5 billion is Georgia Power Co.’s share, the investor-owned utility told the Georgia Public Service Commission Thursday in a construction monitoring report. GPC owns 45.7% of the project.
A redacted project ownership participation agreement term sheet was filed with the commission as a trade secret, according to PSC spokesman Bill Edge, who emphasized that the commission does not regulate MEAG or the other public power owners.
Through restructuring, Westinghouse is shedding billions in losses related to its work as the prime contractor at Plant Vogtle and at the South Carolina V.C. Summer plant.
The South Carolina project's owners decided July 31 to stop work on their two AP1000 reactors due to the high completion costs.
Georgia Gov. Nathan Deal lauded the decision of the co-owners to complete the new reactors at Plant Vogtle.
“Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities have made the right decision for our state,” Deal said. “These new units will provide clean and affordable energy to Georgians for more than 60 years while creating 6,000 jobs during project construction and 800 well-paying, permanent ones after.”
An agreement struck with Georgia Power appears to be the reason public power agencies involved in the project have withheld information about their completion costs.
MEAG and the public power owners agreed as a condition going forward to abide by decisions of the Georgia PSC pertaining to Georgia Power’s revised cost estimates and the new construction schedule, according to GPC.
If the PSC does not approve those revisions, or deem some costs to be unreasonable, the public power owners can abandon the project. If that occurs, Georgia Power will not proceed.
“The reason for this condition is simple: the non-Georgia Power owners are not willing to pass on to their customers costs that the commission determined were unreasonable or imprudent to pass on to Georgia Power’s customers,” GPC said in its report.
The new schedule calls for unit 3 to be completed in November 2021 and for unit 4 to be done in November 2022. MEAG owns 23% of the two existing reactors at Plant Vogtle.
The Westinghouse bankruptcy court recently approved turning management of the new reactor project over to Southern Nuclear Operating Co., a Birmingham, Ala.-based affiliate of Southern Co.
San Francisco-based Bechtel Corp., an engineering, construction and project management firm, will be the new prime construction contractor.
GPC said the new cost estimate contains a number of assumptions that could also result in terminating the work at Vogtle, including the failure of Westinghouse’s owner, Toshiba Corp., to make periodic payments on a $3.68 billion guaranty. A $300 million payment is due in October.
Toshiba’s own financial difficulties stemming from write-downs at Westinghouse and its own accounting irregularities remain an “unknown” risk for the project, Georgia Power told the PSC.
The failure of Westinghouse to fulfill a service agreement providing the intellectual property rights to the new AP1000 technology could be another unknown future risk.
Advanced nuclear facility federal income tax credits are also considered part of the new cost estimate, but that is also a risk because legislation currently requires reactors to be in-service by Jan. 1, 2021 to qualify. Legislation extending the date has passed the House, and is pending in the Senate.
“The failure of Congress to extend [the tax credit] will have a material adverse effect on the economics of going forward with this project,” GPC said Thursday.
The new costs and timelines must be approved by various regulators. The PSC said it will hold hearings over the coming months, and expects to make a decision in mid- to late-February.
The decision to pursue the project is viewed as credit negative, said Dan Aschenbach, an analyst for Moody's Investors Service covering the nuclear project.
“We view this development as credit negative for MEAG Power because the increased cost and delayed timetable will continue to weaken the cost-effectiveness of its take-or-pay contracts with several Southeast utilities,” he said.
Based on an extensive assessment of the Westinghouse bankruptcy on the project and the uncertainty around cost and timetable, the project is now expected to cost about $25 billion, which is much higher than the previous estimate, Aschenbach said.
Moody’s assigns A2 ratings to MEAG’s Project J and M bonds, and a Baa2 rating to Project P. The outlook is negative.