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Southern Company (SO) to Move Ahead With Vogtle Project

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Electric utility firm Southern Company’s (SO - Free Report) subsidiary, Georgia Power, recently announced plans to move ahead with the construction of its much talked about Vogtle Plant in Georgia after completing the full-scale schedule and cost-to-complete analysis of the project.  On Aug 31, Georgia Power filed a recommendation with the Public Service Commission (PSC) to pursue the construction of two nuclear reactors at Vogtle units 3 and 4.  The PSC is soon to complete the review process and take a final call regarding the expansion of the Vogtle project.

The Vogtle nuclear reactors have been grappling with cost overruns and scheduling delays since the commencement of the construction. Further, the bankruptcy of Westinghouse, the major construction contractor of the two nuclear reactors of the plant, aggravated the costs further and led to more delays. Since then a cloud of uncertainty is hovering over the beleaguered plant. The project is already running three years behind schedule and is over budget by more than $10 billion. In June, Westinghouse’s parent company Toshiba Corporation agreed to provide a financial assistance of $3.68 billion for the development of two nuclear reactors. Also the owners of the project have already been granted $8.3 billion loan guarantees by the Department of Energy.

Meanwhile, Georgia Power had 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.

Southern Company believes that the plant will make the United States nuclear competitive, helping the nation catch up with the likes of Russia and China. Many nuclear proponents have also supported the company’s commitment toward nuclear power with zero emissions, finding it more reliable than solar and wind energy. With the decision to continue with the project, Vogtle plant in Georgia will be 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.

However, the rating agency, Moody’s Investors Service, believes that the company’s decision to continue with the project will increase the credit risk. Moody’s believes that the project which has been missing milestone dates and suffering from poor productivity rates is likely to suffer from more delays and ballooning costs. The decision which is likely to hurt the financials of the company, may also affect its negotiations over the acquisition of South Carolina's state-owned electric utility, Santee Cooper.

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 (ABY - Free Report) 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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