BRADENTON, Fla. – Agreements settling construction disputes over new nuclear units in Georgia and South Carolina are positive credit factors for the public and private owners of the projects, according to Moody's Investors Service.
The agreements at Georgia's Plant Vogtle and South Carolina's V.C. Summer Nuclear Station resolve long-term disputes that had plagued the projects, and provide clarity on costs even though challenges remain, Moody's said in a report Oct 29.
The agreement at Vogtle, being developed by Georgia Power Co., is also expected to end litigation between the owners and the engineering, procurement, and construction contractor. The cooperative Oglethorpe Power Corp. owns a 30% stake in Vogtle, while the Municipal Electric Authority of Georgia owns a 22.7% interest.
South Carolina Electric & Gas Co., is developing two units at Summer, where the South Carolina Public Service Authority, known as Santee Cooper, is a 45% owner.
The plants in both states are the U.S.'s first nuclear units using Westinghouse's new AP1000 reactors.
While large-scale construction projects are generally subject to cost increases and delays, other factors confront the new units in South Carolina and Georgia, Moody's analyst Dan Aschenbach, an author of last week's report, said Tuesday.
"The potential for higher costs is a particular concern for these new nuclear projects, which have what project owners term first-of-a-kind engineering issues, as well as an untested regulatory process," Aschenbach said.
"Some of the work has never been done before on this scale, and the question of how these pressures will be managed adds to the complexity of the next stage of the projects," he said.
In a separate but related agreement, Westinghouse Electric Company LLC agreed to acquire Stone and Webster, one of the original construction contractors on the projects, from Chicago Bridge & Iron Co.
Westinghouse plans to engage Fluor Enterprises Inc. as a new construction subcontractor at both projects.
Moody's said it views the removal of Chicago Bridge & Iron as a positive development, though the use of Fluor Enterprises – the third firm engaged since the projects began – is a potential risk as another new party is introduced.
Under the agreements, Georgia Power will pay about $350 million more to resolve the disputes while Oglethorpe Power will pay $230 million and MEAG will pay $174 million, according to Moody's.
MEAG Power advised bondholders in a market notice Oct. 27 that the agreement re-establishes the in-service dates for Vogtle's Unit 3 in 2019 and Unit 4 in 2020.
"We are extremely pleased with the leadership position Westinghouse has assumed and believe that in addition to settling the disputes that have been under way this arrangement will significantly benefit the efficiencies and scheduling of the project," MEAG Power chief executive officer Bob Johnston said in the notice.
South Carolina Electric & Gas will pay up to $488 million more to resolve its dispute, while Santee Cooper will pay an additional $112.5 million.
While Georgia and South Carolina will be the first to bring new technology to the nuclear generating industry, the Tennessee Valley Authority is expected to bring the first nuclear plant on line in the U.S. since 1996.
On Oct. 22, TVA announced that it received an operating license for its new Watts Bar Unit 2 reactor from the Nuclear Regulatory Commission. The unit is scheduled to come on line early next year using existing technology.
Watts Bar 2 is three years behind schedule and expected to have a final cost of about $4.5 billion, which is about 50% above the project's 2007 completion budget, according to Standard & Poor's.
