BRADENTON, Fla. – The bankruptcy of the prime contractor constructing two nuclear units in South Carolina could have a material impact on the state’s public power agency, bondholders learned Wednesday.
The authority remains healthy, executives with the South Carolina Public Service Authority, also known as Santee Cooper, said in recorded and written presentations, despite the impact Chapter 11 filing of Westinghouse could have on the nuclear projects it has financed.
“Our financial position, our finance, operations and rate structure are sufficiently robust to manage potential cost increases and construction delays, and allow us to continue to maintain a strong credit for our bondholders and creditors,” said Lonnie Carter, the authority's president.
The state-run SCPSA provides retail and wholesale power to 2 million South Carolinians.
The authority said it has evaluated a variety of scenarios, including the potential for absorbing a material increase in costs as a result of the bankruptcy, and canceling the construction of the two new units at V.C. Summer.
The authority believes that the impact under either scenario will be manageable, said Chief Financial Officer Jeff Armfield.
“We would expect a $2.25 billion increase in Santee Cooper’s costs related to the plant to slightly reduce our debt service coverage and require less than an 8% increase in our rates,” Armfield said. “If we were to cancel or suspend the project in 2018, our metrics would see a slight improvement with minimal impact on our rates, as we would be able to leverage our existing generation resources to meet our power supply requirements.”
Santee Cooper had about $1 billion of aggregate liquidity at the end of 2016, which included cash-on-hand, a commercial paper program and a revolving credit facility. That liquidity amounts to more than one year of operating expenses, according to Armfield.
To date, the authority has issued $4.2 billion of bonds to support its 45% stake in the construction of the new units at V.C. Summer. South Carolina Electric & Gas, owned by SCANA Corp., owns 55% of the project.
Westinghouse, the engineering, procurement, construction contractor, filed for bankruptcy March 29 and could reject its contracts for the South Carolina nuclear project as well as two new units it is constructing in Georgia.
“We have worked with SCANA to identify ways to ensure an orderly transition to new consortium partners if it becomes necessary, either through entering into a new EPC Agreement with a new third party or by managing the construction directly with contractors,” Michael Crosby, Santee Cooper’s senior vice president of nuclear energy, said Wednesday.
Potential partners in a new consortium include Fluor Corp., which is currently a subcontractor for the project, Bechtel Corp., a U.S.-based construction and civil engineering company, and Areva Energy Co., a French multinational group specializing in nuclear power.
In anticipation of Westinghouse’s bankruptcy filing, Santee Cooper and SCE&G entered into a 30-day interim assessment agreement that requires them to pay for construction to continue at the V.C. Summer site.
The agreement, which was approved by the bankruptcy court, also allows the project owners to gather information about the future of the project, Crosby said.
The interim assessment agreement expires April 28, but could be extended, Crosby said.