As Southern Co. opens a review of its troubled nuclear reactors following a bankruptcy filing by contractor Westinghouse Electric Co., the Trump administration has 8.3 billion reasons to be worried.
Southern is financing the reactors with $8.3 billion in federal loan guarantees approved under President Barack Obama’s initiative to build the first new nuclear plants in the U.S. in 30 years. Now, following delays and cost overruns, financial troubles at Toshiba Corp. unit Westinghouse have put the taxpayers’ interest at risk, along with the fate of the projects.
The government “has issued a loan guarantee to one of the stakeholders involved, and for that and other important reasons, we are keenly interested in the bankruptcy proceedings and what they mean for taxpayers and the nation,” said Lindsey Geisler, a U.S. Energy Department spokeswoman. “We expect the parties to honor their commitments and reach an agreement that protects taxpayers.”
Hours after Westinghouse filed for Chapter 11 protection Wednesday, chief executive officers from Southern and Scana Corp., which has also hired the contractor for a reactor project, said work would continue while they assess the situation. Southern CEO Thomas Fanning said he flew to Tokyo to meet Toshiba CEO Satoshi Tsunakawa “business person-to-business person” to hammer out a plan to get two nuclear reactors finished at its Vogtle plant in Georgia. Toshiba and Westinghouse made “moral commitments” to finish the Vogtle project, Fanning said in an interview with Bloomberg Television.
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Fanning also said he discussed the projects with U.S. Energy Secretary Rick Perry and Commerce Secretary Wilbur Ross. The Trump Administration expects all parties to agree on a plan to complete the projects, Geisler said.
“Obviously, our federal government is very concerned about a potential sale of Westinghouse and what that might mean,” Stephen Byrne, chief operating officer of Scana, said on a conference call Wednesday.
Southern’s 30-day review of contracts, projected costs and time lines for the Vogtle project could lead to decisions to continue construction with other contractors, or to abandon the work done so far. If Southern’s contract with Westinghouse is terminated and the project is abandoned, the Energy Department could require repayment of its investment over five years, according to Moody’s Investors Service analyst Michael Haggarty.
“We as a firm view that as unlikely, although the chance admittedly probably has gone up with all these developments,” Haggarty said on a conference call Thursday. “We still think that the utilities are going to continue to complete these plants, which is why all these activities are going on to avoid stopping construction right now.”
U.S. taxpayers have already financed $6.5 billion in loan guarantees for Southern and its partners that were awarded in 2014 to build the Vogtle plant. The Energy Department followed up in June 2015 with an $1.8 billion loan guarantee for the project.
“We think there is a lot of risk,” said Autumn Hanna, a senior program director for the Washington-based watchdog group Taxpayers for Common Sense, a group that has been critical of the loan guarantees. “We are really afraid this puts the $8 billion on line even more for taxpayers.”
Southern is deploying two of Westinghouse’s newly designed AP1000 1,100-megawatt nuclear reactors at Vogtle to further the Obama administration’s “commitment to jump start the U.S. nuclear power industry” and promote carbon-free energy, Obama’s Energy Secretary Ernest Moniz said in 2014.
“The innovative technology used in this project represents a new generation of nuclear power with advanced safety features and demonstrates renewed leadership from the U.S. nuclear energy industry,” he said at the time.
Still, finishing the Vogtle project, as well as Scana’s reactors near Jenkinsville, South Carolina, may not make economic sense with Westinghouse in bankruptcy, Bloomberg Intelligence said in a research note Thursday. Jacob Hawkins, a Southern spokesman, didn’t immediately respond to a phone call or email.
“Shareholders may prefer immediate shutdowns to avoid further construction risk,” Bloomberg Intelligence said. State regulators will have the final say in whether to abandon or complete the projects.
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