BRADENTON, Fla. – The insolvency of the contractor for two new nuclear units at Plant Vogtle in Georgia took a toll on another public utility funding a share of the project.
The credit outlook on Dalton Utilities was revised to negative Monday as Moody's Investors Service affirmed its A2 issuer rating. The utility has no debt outstanding.
Moody’s attributed the outlook change – as it has for other public utilities involved with the project - to the March 29 Chapter 11 bankruptcy of Westinghouse Electric Co., the engineering, procurement and construction contractor for units 3 and 4 at Plant Vogtle.
“With the bankruptcy filing by Westinghouse, we expect the fixed-price EPC contract for Vogtle 3 and 4 to be rejected as part of the court proceeding,” said Moody’s analyst Dan Aschenbach. “A related concern is the financial condition of parent company Toshiba Corp. and whether it has the wherewithal to fully honor its sizeable parental guarantee that now backstops the EPC.”
Dalton, a combined utility near the northwest Georgia state line with 73,000 customers, is self-funding its 1.6% share of the new units and could see its costs increase substantially, he said.
Dalton and other owners of the new Vogtle units have signed an interim assessment agreement with Westinghouse that enables Georgia Power Co., the majority shareholder, to continue site work as the prime contractor.
The agreement is set to expire Friday, although it could be extended.
“The project owners are evaluating their alternatives, including the potential for completing the project themselves or engaging alternative contractors, which in all likelihood would result in higher risk and additional costs for Dalton and its retail customers,” Aschenbach said.
Moody's said its affirmation of Dalton’s A2 issuer rating assumes that Toshiba’s guarantee will remain in place.
Although Toshiba has provided backstop guarantees for nuclear projects in Georgia and South Carolina, the firm has been struggling financially due to construction losses incurred by Westinghouse, which it purchased in 2006.
The Japanese firm placed Westinghouse into bankruptcy to shed billions of debt, and has said it plans to eliminate risks from the U.S. nuclear ventures through reorganization.
On Monday, Toshiba announced that it is splitting its company into four subsidiaries as part of a strategy to strengthen its governance system.
By Oct. 1, it expects to spin off its Energy Systems & Solutions Company and its Nuclear Energy Systems & Solutions Division to a wholly owned company, which will obtain special construction business licenses.
Toshiba said three other new companies are expected to be formed by July 1, incorporating other segments of its business.