Electric utility firm The Southern Company (SO - Free Report) , together with other co-owners of the Vogtle Project, recently requested for additional federal loan guarantees, extending the $8.3 million loan guarantees already issued for the project. Georgia Power, subsidiary of Southern Company, is the chief owner of the project with a 45.7% interest. The other co-owners include Oglethorpe Power, MEAG Power and Dalton Utilities.
Oglethorpe Power Corporation — second-largest stakeholder of the Vogtle project with a 30% interest — recently sought additional loan guarantee of $1.6 billion from the Department of Energy (DOE) to complete the construction of two nuclear reactors at its Vogtle power plant. The company already has a $3 billion loan guarantee from DOE out of which it has drawn $1.7 billion till now. The owners of the project have already been granted an $8.3 billion loan guarantees by the DOE comprising a loan guarantee of $6.5 billion to Georgia Power and Oglethorpe Power in 2014 and an additional support of $1.8 billion in 2015.
Westinghouse was the major construction contractor and designer of the two nuclear reactors at Vogtle power plant. However, Westinghouse had filed for bankruptcy in March, raising concerns over the nuclear industry. Nevertheless, in June, Westinghouse’s parent company Toshiba Corporation had agreed to provide a financial assistance of $3.68 billion for the development of two nuclear reactors. The Vogtle nuclear reactors have been grappling with cost overruns and scheduling delays since the commencement of construction. The project is already running three years behind schedule and is over budget by more than $10 billion.
A cloud of uncertainty is hovering over the beleaguered plant. Georgia Power has been assessing the various feasible alternatives including the completion of one or both the reactors, termination of the project or switching to a different power source.
As of now, Vogtle plant in Georgia is the only project which is under construction in the United States. Last month, South Carolina Electric & Gas — subsidiary of SCANA Corporation (SCG - Free Report) — terminated the construction of $18 billion VC Summer nuclear project in South Carolina. On Aug 25, Duke Energy Corporation (DUK - Free Report) announced the abandonment of Lee III Nuclear Generating Station in South Carolina.
The company had been given a deadline of Aug 31 by the Georgia Public Service Commission to complete the full-scale schedule and cost-to-complete analysis of the Vogtle project. Thus, Georgia Power is likely to file the 17th Vogtle Construction Monitoring report tomorrow where it will take its final official call regarding the completion of the project.
Zacks Rank and Key Pick
Southern Company is one of the largest and best-managed electric utility holding companies in the United States. The firm dominates the power business across the southeastern region. Southern Company has lost 2.5% of its value year to date against 9.3% growth of its industry. However, the company delivered an average positive earnings surprise of 0.86% in the trailing four quarters.
Southern Company currently carries a Zacks Rank #3 (Hold).
Atlantica Yield plc is one of the better-ranked players in the energy space sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Atlantica Yield is expected to deliver year-over-year growth of 1,340% and 66.13% in its earnings in 2017 and 2018 respectively.
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