SCE&G says new V.C. Summer nuke agreement will prevent further delays

Dive Brief:

South Carolina Electric & Gas and Santee Cooper have reached a deal to speed development of two new nuclear units and prevent further cost overruns, but in the short term the arrangement will add $286 million and $112.5 million to their costs, respectively, the Post and Courier reports.
Under the agreement, Westinghouse Electric Co. will purchase the firm which had been constructing the reactors, Stone & Webster, and will replace the company with Fluor Corp. as the construction manager.
Santee Cooper called the move a "positive development" that offers both penalties and incentives aimed at bringing the new units online in 2019 and 2020. Under the new terms, payment to contractors would be contingent on construction progress.

Dive Insight:

Years behind schedule and more than $1 billion over budget, SCE&G and Santee Cooper have restructured the plan to expand nuclear generation at the V.C. Summer nuclear plant, but said it will require taking on additional costs.

Going forward, the new engineering and construction agreement will tie payments to a milestone schedule, increase liquidated damages and add a fixed-price option that, if exercised, would significantly shift the remaining financial risk to the contractors. Santee Cooper said it would pay an additional $112.5 million to settle known construction cost increases agreed to last year, while SCE&G would take on $286 million.

Total construction costs for the project now exceed $7.1 billion for SCE&G.

"This is a positive development in the new nuclear project, because it offers significant incentives and penalties associated with bringing the units online in 2019 and 2020," Santee Cooper President and CEO Lonnie Carter said in a statement. "The new fixed price option would limit construction costs if we choose to exercise it. Finally, we are confident that Fluor will bring solid expertise and resources that will keep the project on track to deliver 2,200 megawatts of clean energy to South Carolina by 2020."

Unit 2 is now slated to come online by Aug. 31, 2019, with Unit 3 scheduled for a year later.

SCANA Chairman and CEO Kevin Marsh said the switch to using Fluor on construction would benefit the project, as the firm has previously been involved at the site. "Fluor is well respected in the industry and has been involved with many large electric generation projects, including our VC Summer Unit 1," he said.

"Fluor has deep South Carolina roots and an excellent record of delivering on commitments," Marsh said in a statement. "The amendment to the EPC contract provides for significantly higher liquidated damages that are linked to timely completion of the nuclear plants and qualification for federal production tax credits."

SCE&G's move follows on the heels of plans to expand a Texas nuclear plant and federal regulators giving the Tennessee Valley Authority the first operating license since 1996 for its Watts Bar Unit 2 reactor last week. Even so, the head of the Nuclear Energy Institute predicted more of the U.S. reactors in deregulated markets would be forced to close thanks to tough market conditions.