Southern increases Vogtle nuke price tag by $1.1 billion

Dive Brief:

Southern Co. and its utility subsidiary Georgia Power will pay an additional $1.1 billion to finish two units at the Vogtle nuclear power plant, the companies announced Wednesday.
Southern originally estimated it would pay $7.3 billion to complete Units 3 and 4 at Vogtle after taking over construction from contractor Westinghouse following its bankruptcy last year. That estimate is now $8.4 billion, the companies said in filings with the Securities and Exchange Commission, taking the full price to more than $27 billion.
Southern said the higher costs will not be passed on to customers and do not affect the construction timeline for the units, which are expected to be complete in 2021 and 2022, respectively. The company’s stock dropped more than 4% on Wednesday afternoon, despite Southern reporting better-than-expected second quarter earnings.

Dive Insight:

The Vogtle plant is the sole nuclear facility under construction in the United States and has become a symbol of an industry plagued by delays and cost overruns.

The $27 billion pricetag is more than double what Southern estimated the Vogtle expansion would cost when Georgia regulators approved it in 2008, and the plant is more than five years behind schedule.

The delays stemmed from problems with contractor Westinghouse and its AP1000 reactor. The companies began building the units without the reactor design completed, and repeated construction problems at Vogtle and other plants forced Westinghouse into bankruptcy in 2017.

Shortly after, two utilities in South Carolina decided to abandon construction of another AP1000 project, the V.C. Summer nuclear plant. But Southern pressed on, assuming control of construction itself from the contractor and winning regulatory approval in December to charge customers an additional $7.3 billion to finish the project.

Coming so close to that decision, Southern will not seek to pass the additional $1.1 billion in costs announced Wednesday onto customers, CEO Thomas Fanning said.

“Although we believe the increased projected costs are reasonable and necessary to complete the project, we have made the judgment that it's in the best long-term interests of investors, customers and other stakeholders that we not disrupt project momentum by seeking approval of the base capital cost increase so soon after receiving PSC approval to continue with the project,” Fanning said Wednesday on Southern's second quarter earnings call.

The increased costs are another hit for Southern, which endured two straight quarters of losses stemming from another troubled mega-project — the Kemper coal gasification facility, which it abandoned last year. In May, Southern announced it would sell Florida utility Gulf Power to help cover a $7 billion equity need created by the projects.

Southern owns nearly half of the Vogtle plant along with Oglethorpe Power Corporation (30%), Municipal Electric Authority of Georgia (22.7%) and Dalton Utilities (1.6%). In a release, Oglethorpe said the impact of Southern’s new cost estimates will be “muted” on its members, as the budget it approved to finish the plant is “adequate to cover the bulk of its share of the recently announced increases.”