Electric utility firm The Southern Company (SO - Free Report) recently entered into a new agreement with Japan’s Toshiba Corporation. Per the deal, Toshiba will pay the remaining guaranteed payments worth $3.2 billion by Dec 15, 2017, for the development of two nuclear reactors at its $25-billion worth Vogtle plant in Georgia. Southern Company’s Georgia unit owns more than 46% stake in the Vogtle plant and is due to receive $1.47 billion.
Westinghouse was the major construction contractor and designer of the two nuclear reactors at Vogtle. However, Westinghouse filed for bankruptcy in late March because the company’s corporate parent, Toshiba suffered huge losses due to the contractor’s projects in Georgia and South California. Therefore, Westinghouse exited Vogtle project as part of the bankruptcy proceedings. Since then, a cloud of uncertainty has been hovering over the beleaguered plant.
In June, Toshiba clinched a deal with Southern Company to provide a financial assistance of $3.68 billion for the project. Toshiba was supposed to make the payments in installments between October 2017 and January 2021. Till date, Vogtle co-owners namely Georgia Power, Oglethorpe Power, MEAG Power and Dalton Utilities have received $455 million of the guaranteed payments.
The latest positive development comes as a brief respite from the various controversies and challenges surrounding the project.
The Vogtle nuclear reactors have been grappling with cost overruns and scheduling delays since the commencement of the construction. The bankruptcy of Westinghouse has aggravated the costs and delayed the project further. The project is already running three years behind schedule and is over budget by more than $10 billion and is likely to go up by $20 billion by 2022. Few days back, Georgia’s regulatory staff raised questions about the increasing costs of the project and wanted to call it off unless Southern Company and Georgia Power bore part of the ballooning cost.
Georgia Power filed a recommendation with the Public Service Commission (PSC) on Aug 31 to carry out 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 in February 2018. The latest development will help the project to gain momentum as it is under review.
As of now, Vogtle plant in Georgia is the only nuclear project which is under construction in the United States. In August, South Carolina Electric & Gas — subsidiary of SCANA Corporation (SCG - Free Report) — terminated the construction of $18-billion VC Summer nuclear project in South Carolina. Duke Energy Corporation (DUK - Free Report) also pulled the plug on Lee III Nuclear Generating Station in South Carolina. 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. If PSC does not come with a favorable judgment on the project and the project gets scrapped, it will come as a huge blow to the nuclear industry of America.
Southern Company is one of the largest generators of electricity in the nation. The company currently carries a Zacks Rank #3 (Hold).
Atlantic Power delivered an average positive earnings surprise of 8.81% in the trailing four quarters.
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