Oglethorpe to vote on Vogtle future

Friday, 17 August 2018

Following Westinghouse's March 2017 bankruptcy filing, Vogtle's co-owners - Georgia Power (45.7%), Oglethorpe Power (30%), MEAG Power (22.7%) and Dalton city (1.6%) - conducted a comprehensive cost review prior to their decision to complete the two AP1000 units. Based on that analysis, Oglethorpe last summer established its budget for the project at USD7 billion, including USD490 million in contingency at the company level.

Since the decision to continue with the project, work at the site has continued under the project management of Southern Nuclear, which like Georgia Power is a subsidiary of Southern Company. Southern Nuclear's "hands on" experience on the project, together with firmed-up subcontracts, have since led to revised cost estimates, Oglethorpe President and CEO Mike Smith told investors in a conference call on 16 August.

Capital costs are now expected to increase by a total of about USD1.5 billion for the project, with Oglethorpe's share of this estimated to be USD450 million. The USD490 billion contingency set aside under Oglethorpe's USD7 billion budget would absorb these increases, but in doing so would be almost completely exhausted, Smith said. The company is therefore analysing the need to increase its contingency going forward. Oglethorpe anticipates having to increase its budget for Vogtle to the region of USD7.25 to 7.5 billion if the project continues, Smith said.

As the increase in the total Vogtle project budget is over USD1 billion, it has passed the threshold for a Project Adverse Event (PAE) under the terms of Vogtle's Joint Ownership Agreement. Georgia Power's decision earlier this month not to seek recovery of its share of the latest cost increase via the Georgia Public Service Commission is also a PAE threshold, Smith said. Under the terms of the ownership agreement, all of the project's co-owners must now vote on the continuation of the project. Owners of at least 90% of the interest must be in favour if construction is to continue.

Oglethorpe's board expects to take a vote on the PAEs by the end of September, Smith said, noting that the project continues to make good progress. Scheduled in-service dates of November 2021 for Vogtle 3 and November 2022 for unit 4 are not expected to change, he said. He noted that the construction of unit 4 had benefited from "lessons learned" from unit 3 with improvements across "all metrics across the board" for unit 4 compared with unit 3. "If you're going to complete unit 3, it makes all the sense in the world to complete unit 4," he said.

Oglethorpe last year received a conditional commitment from the US Department of Energy for a further loan guarantee of USD1.6 billion for the project, for which it had already secured a USD3 billion loan guarantee. The conditional commitment is due to expire at the end of September, Chief Financial Officer Betsy Higgins said. "We anticipate seeking an extension of the additional commitment … assuming the co-owners vote to continue the project," she added.

Vogtle 3 and 4 are the only new nuclear units currently under construction in the USA. Construction of Vogtle unit 3 began in March 2013 and unit 4 in November the same year. Construction of two AP1000s at VC Summer in South Carolina was abandoned in August 2017.

AP1000s are also currently under construction in China, where two units - Sanmen 1 and Haiyang 1 - have now been connected to the grid. Sanmen 2 has now also reached criticality, while fuel loading is under way at Haiyang 2.