Oglethorpe seeks funds to complete Vogtle units

25 August 2017

Oglethorpe Power, which owns a 30% stake in the project to build two AP1000 reactors at the Vogtle site in Georgia, is seeking an additional federal loan guarantee to fund its share of the cost of completing the units. Construction work continues on Vogtle 3 and 4, pending a final decision to complete them.

Work has continued uninterrupted at Vogtle units 3 and 4 since Westinghouse filed for chapter 11 bankruptcy protection in March. Project management and control transitioned to Southern Nuclear after a services agreement between Westinghouse and Vogtle's co-owners - Southern Company subsidiary Georgia Power (45.7%), Oglethorpe Power (30%), MEAG Power (22.7%) and Dalton city (1.6%) - became effective on 27 July. Before that, work had continued under an interim assessment agreement.

Westinghouse's parent company, Toshiba Corporation, agreed in June to pay Vogtle's owners a maximum of $3.68 billion under parental guarantees put in place when Westinghouse received the order for the units in 2008.

In an investor update yesterday, Oglethorpe president and CEO Mike Smith said the owners continue to evaluate the estimated cost and schedule to complete construction of the project without the price and schedule protections of the Westinghouse EPC contract.

"We are fortunate to have the ability to continue construction as Southern Nuclear is a respected operator of a fleet of nuclear units - including four in which we have an ownership interest - and is well positioned to step into the shoes of Westinghouse to oversee the construction of Vogtle 3 and 4," he said.

However, Smith noted, "Even with the proceeds from Toshiba, the cost to complete the project is expected to exceed our prior estimates." He said Oglethorpe's share of the project has increased from $5 billion to between $6.5 billion and $7.3 billion. "These figures assume that Toshiba fulfils their obligation to pay Oglethorpe $1.1 billion as put forth in the settlement agreement," he said.

"If we continue with the project, we fully expect Southern Nuclear Corp will manage the project towards the lower end of our disclosed range," Smith said. "However, we are conservatively planning around the upper end of the range given that the fixed price protection previously included in the EPC contract is no longer there."

Smith said Oglethorpe is seeking additional funding from the Department of Energy's (DOE's) loan guarantee program for the project "if we go forward".

Oglethorpe chief financial officer Betsy Higgins said, "We have a loan from the DOE of $3 billion and we closed in 2014, of which we have advanced $1.7 billion. Given the Westinghouse bankruptcy and disruption on the project, the loan was amended at the end of July to have some conditions to where advances are suspended until a determination to continue construction on the project with the new budget and schedules made and we have an agreement with a new contractor in place."

Higgins said the company has submitted a loan application and is in active discussions with the DOE. Oglethorpe, she said, is seeking additional funding in the range of $1.5-$1.6 billion. Higgins noted that, as with the terms of the original loan guarantee, the company is limited to borrowing up to 70% of its share of the project cost. Oglethorpe anticipates a conditional commitment from the DOE by end of September, which is the end of the US government's fiscal year.

"If the owners decide not to continue construction or the conditions are not met by the end of this year, then the DOE will have discretion to require a five-year payback of the loan," she noted.

Georgia Power is working to file its final its recommendation on or not to proceed with the project with the Georgia Public Service Commission (PSC) by the end of this month. "Ultimately, we understand that as part of Georgia Power's regulatory process, the Public Service Commission will weigh-in on the recommendation to continue the project or not," Smith said.

Construction of Vogtle unit 3 began in March 2013 and unit 4 in November the same year. Preliminary in-service dates for the units, if they are completed, are between February 2021 and March 2022 for Vogtle unit 3 and between February 2022 and March 2023 for unit 4.

On 31 July, Scana Corporation subsidiary South Carolina Electric & Gas announced its decision to cease construction of two AP1000 units at its VC Summer plant in South Carolina. The announcement followed co-owner Santee Cooper's decision to suspend construction because of projected completion delays and cost overruns.

Researched and written
by World Nuclear News

Filed under: New build, Construction, USA