By Norris McDonald
Toshiba/Westinghouse is probably having a financial meltdown over the construction of the Summer nuclear power plant in South Carolina because SCANA did not secure loan guarantees for the project.
The Southern Company/Georgia Power's Vogtle nuclear power plant in Georgia does have Department of Energy Loan Guarantees and its projected six month construction delay shouldn't be much of a financial threat. At least not one that should lead to the bankruptcy and/or dissolution of Toshiba.
SCANA Corp.'s South Carolina Electric & Gas Co. announced its units at V.C. Summer were roughly eight months behind. Toshiba's CEO has said that Westinghouse will need an additional $6.1 billion to finish the U.S. nuclear projects if productivity remains at the same rate. There is much discussion over Vogtle's cost and schedule after Toshiba has said it would book a $6.3 billion write-down from its nuclear construction business, which is tied to Vogtle and Summer.
Here is what SCANA says about loan guarantees:
We have provided information to DOE as part of the loan guarantee application process, but DOE has not provided us with specifics related to terms and conditions that might be attached to the loan guarantees. Without such information, we cannot effectively determine whether it would make sense for us and our customers to participate in the loan guarantee program. We have been consistent in stating that the loan guarantees are not essential to our ability to fund our nuclear construction project.
I am no financial wizard, but I think loan guarantees would make lenders feel much better about a project. This is probably where the problem for Toshiba is located. Of course, Toshiba is asking for an additional $6.1 billion to finish Vogtle and Summer. Is Toshiba looking for South Carolina and Georgia ratepayers to bail them out? Or maybe at least for the principals to speed up their construction schedules?
The Department of Energy issued $1.8 billion in loan guarantees in June 2015 to three subsidiaries of the Municipal Electric Authority of Georgia (MEAG Power) to support the construction of two new 1,100 megawatt Westinghouse AP1000® nuclear reactors at the Alvin W. Vogtle Electric Generating Plant. This was combined with previously issued $6.5 billion in loan guarantees to Georgia Power Company (GPC) and Oglethorpe Power Corporation (OPC), to allow the project to be fully financed.
Toshiba's Westinghouse Electric Co. has told Southern that the schedule for Unit 3 slipped another six months to December 2019, the company disclosed in its annual report. Unit 4's commercial operation date has moved to September 2020.
There are several key dates for Vogtle. The first is June 2019 and 2020. Those are the dates in which Westinghouse must finish units 3 and 4, or it will pay liquidated damages to Georgia Power as part of a wide-ranging settlement agreement between the companies.
The second is December 2020. If both of Vogtle's reactors aren't producing electricity by then, Georgia Power faces a cut in its rate of return on equity, as part of a separate agreement between the utility and the PSC that involved the project's increased costs.
The bottom line is that Vogtle's loans are guaranteed and Summer's are not. Looking at all of the players involved in the construction of these plants shows what a convoluted contracting and financing nightmare this must be. There must be a simpler way. (Green Tech Media, 2/28/2017, DOE, June 24, 2015, E&E News, 2/23/2017, SCANA)