A bankruptcy filing by the Plant Vogtle nuclear expansion’s key contractor will likely mean more delays and higher costs for a project already billions over budget and years behind schedule, a state regulator said.
Westinghouse Electric Corp., a unit of Japanese conglomerate Toshiba, on Wednesday filed for Chaper 11 protection after years of massive losses at Vogtle and another project in South Carolina. The filing had been expected.
Westinghouse will remain in business while renegotiating debts, but the move means new complications and questions about its role at Vogtle.
“This is a real blow to Georgia,” said Stan Wise, chairman of the Georgia Public Service Commission, which regulates Plant Vogtle operator Georgia Power. Wise has been a vocal supporter of the expansion at Vogtle, where two new reactors are being added. The project represented the first new nuclear construction in the U.S. in three decades.
Wise, in an interview with the AJC on Tuesday, said the financial upset means more “time and money” will be needed to finish the work and get the reactors on line.
Critics of the Vogtle project have said a bankruptcy reorganization could allow Westinghouse to renegotiate contracts under court supervision. That could ultimately lead to higher costs for Georgia Power, its partners in the expansion, and their customers if state regulators approved.
Georgia electric customers already are helping pay financing costs for the project and will ultimately pay a share of construction costs. The current Vogtle surcharge adds about $100 a year to most residential customers’ bills.
The PSC attempted to control future cost increases through a settlement last year with Georgia Power, the lead partner in the project, that sets certain cost limits and profit caps if the new plants aren’t operational by the end of 2020.
The latest crisis likely puts that deal up in the air, Wise said.
“If Westinghouse abandons the construction effort, which they’ve said they will, then all bets are off,” said Wise.
Georgia Power and its parent Southern Co., both based in Atlanta, are scrambling to ensure that the thousands of workers remain on site, he said. Plant Vogtle is about 25 miles southeast of Augusta.
“The worst thing that could happen is the work force abandons the site” during the likely transition from Westinghouse’s management, Wise said. A worker walkout is unlikely, but it would endanger the Vogtle project’s viability if it happened, he added.
A Georgia Power spokesman on Tuesday didn’t answer questions about the issues raised by Wise, instead offering an emailed statement.
“We are monitoring the situation and prepared for any potential outcome. We will continue to hold both Westinghouse and Toshiba accountable for their responsibilities under our engineering, procurement and construction agreement and the parent guarantee of Toshiba,” the statement said.
Georgia Power owns almost half of the Vogtle expansion. Oglethorpe Power owns 30 percent of the project and a handful of other partners own the remainder. The total project cost is more than $17 billion.
The “best outcome,” said Wise, would be for Georgia Power to take over construction management. But if Westinghouse used the bankruptcy process to exit the project, the PSC would be obligated to re-examine its approval of the Vogtle project, Wise said.
He said the PSC certified the project plans based on Westinghouse’s role as primary construction contractor and supplier of the reactors.
If Georgia Power takes over the project, “the company will have to come up for re-certification” of the project, he said.
Separately this week, Oglethorpe Power told investors Monday that it expects the Vogtle project to fall further behind schedule.
The latest completion deadlines of December 2019 and September 2020 for the two new reactors “do not appear to be achievable,” Oglethorpe said in a filing to the U.S. Securities and Exchange Commission. The latest deadlines had been supplied by Westinghouse in February, Oglethorpe said in its filing.
Westinghouse is a nuclear-focused descendant of the storied U.S. industrial and electric company. It was acquired in 2006 by Toshiba, best known for laptops and TVs.
The goal of a bankruptcy filing would be limiting Toshiba’s financial damage from Westinghouse’s work on Vogtle and a similar project in South Carolina.
The Vogtle project uses Westinghouse-designed AP1000 reactors. As part of a settlement with Georgia Power over costly delays, Westinghouse also took over as lead contractor in 2015 and bought the construction firm building the new units, CB&I Stone & Webster. That arrangement appears to have contributed to Westinghouse’s mounting financial troubles.
In a statement on its website Wednesday, Westinghouse Electric said it will seek “a strategic restructuring” in bankruptcy court “as a result of certain financial and construction challenges in its U.S. AP1000® power plant projects.”
The company said it has $800 million in debtor-in-possession financing from third-party lenders to help fund operations during reorganization.
2009: Georgia Power gets state regulators’ approval to build two new nuclear reactors at Plant Vogtle, which has two existing units built in the 1980s. State lawmakers allow Georgia Power to collect a surcharge to back the project; it now costs residential customers about $100 a year. Site work begins.
2013: Construction of the reactors begins. The project is to be completed in 2016 at a total cost of $14 billion.
2015: Georgia Power and Vogtle’s construction contractors sue each other over delays that have added more $3 billion and three years to the project’s completion date. In a settlement, Toshiba’s Westinghouse unit takes a bigger role running the project and Georgia Power pays a $760 million settlement.
December 2016: In a settlement with regulators, Georgia Power agrees to controls on the project’s costs and profit penalties if it isn’t completed by the end of 2020.
February 2017: Toshiba reveals $6 billion loss on its U.S. nuclear projects, including Vogtle, igniting speculation that its Westinghouse unit could face bankruptcy or be sold.