U.S. nu­clear re­vival hinges on Ge­or­gia util­ity South­ern

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - JIM POL­SON

With a multi­bil­lion-dol­lar nu­clear project in South Carolina dead, the fate of America’s nu­clear re­nais­sance now rests on one util­ity: South­ern Co.

Scana Corp. dropped plans for two re­ac­tors Mon­day, leav­ing the two that South­ern is build­ing at the Vog­tle plant in Ge­or­gia as the only nu­clear re­ac­tor con­struc­tion in the U.S. And even they are un­der threat: The util­ity had to take over man­age­ment of the project from its bank­rupt con­trac­tor West­ing­house Elec­tric Co., and the plant is still years be­hind sched­ule and bil­lions of dol­lars over bud­get.

Now it must de­cide whether to fin­ish them.

On top of con­struc­tion set­backs and bal­loon­ing costs, nu­clear plants are reel­ing un­der intense com­pe­ti­tion from cheap natural gas and re­new­ables that have spurred states led by New York to go as far as of­fer­ing sub­si­dies for ex­ist­ing re­ac­tors to keep them open.

South­ern call­ing it quits could prove to be the fi­nal nail in the cof­fin for the lon­gawaited U.S. nu­clear re­nais­sance that has failed to ma­te­ri­al­ize in the af­ter­math of Ja­pan’s Fukushima nu­clear ac­ci­dent. In 2012, South­ern and Scana be­came the first com­pa­nies to gain ap­proval to build U.S. re­ac­tors in more than 30 years — only to find them­selves in trou­bling times for the in­dus­try.

On top of con­struc­tion set­backs and bal­loon­ing costs, nu­clear plants are reel­ing un­der intense com­pe­ti­tion from cheap natural gas and re­new­ables that have spurred states led by New York to go as far as of­fer­ing sub­si­dies for ex­ist­ing re­ac­tors to keep them open.

“I’ve thought all along that South­ern would walk away,” Kit Kono­lige, a New York­based an­a­lyst for Bloomberg In­tel­li­gence, said by phone on Mon­day. The aban­don­ment of the South Carolina project in­creases the chances of that hap­pen­ing since “it doesn’t make a whole lot of sense to keep go­ing,” he said.

With­out the new re­ac­tors, Scana may need to add gen­er­a­tion after 2019, Chief Ex­ec­u­tive Of­fi­cer Kevin B. Marsh said Mon­day dur­ing a con­fer­ence call with an­a­lysts. “Based on what we know to­day, we be­lieve that would be gas-fired gen­er­a­tion,” he said.

Al­though South­ern faces many of the same chal­lenges that led Scana and San­tee Cooper, the state power au­thor­ity with a 45 per­cent stake in the project, to shelve their re­ac­tors, the com­pany was quick to put some dis­tance be­tween the two.

“The V.C. Summer and Vog­tle pro­jects are unique and dif­fer­ent in many ways,” given that a new ser­vice agree­ment has been fi­nal­ized that al­lows the util­ity to take over man­age­ment of the re­ac­tors, Ja­cob Hawkins, a spokesman for South­ern’s Ge­or­gia Power unit, said by email Mon­day. For the time being, work con­tin­ues on Vog­tle and a cost anal­y­sis is un­der­way that will be fin­ished next month, he said.

The cost to com­plete Vog­tle “may not be as dra­matic as some fears,” Jonathan Arnold, a New York-based an­a­lyst for Deutsche Bank AG, wrote Tues­day in research, and raised his rat­ing on South­ern shares to buy from hold.

In scrap­ping the South Carolina project, San­tee Cooper said an anal­y­sis showed the plant would not be com­pleted un­til 2024, four years after the most re­cent tar­get pro­vided by West­ing­house, and would end up cost­ing its cus­tomers a to­tal of $11.4 bil­lion.

“I have a feel­ing we’re go­ing to get a sim­i­lar story from South­ern,” Charles Fish­man, a Chicago-based an­a­lyst for Morn­ingstar Inc., said by phone Mon­day. “The four-year ex­ten­sion of the sched­ule es­ti­mated by San­tee Cooper, that was the eye-open­ing num­ber to me. I sus­pect we’re look­ing at that kind of a de­lay for Vog­tle, too, and if that’s the case, the over­head is just huge.”

Mean­while, Ge­or­gia’s util­ity reg­u­la­tor is keep­ing up the pres­sure on South­ern to make a fi­nal de­ci­sion on whether to go forward with the re­ac­tors by the end of the year. Stan Wise, the chair­man of the Ge­or­gia Pub­lic Ser­vice Com­mis­sion, said Vog­tle may be in a bet­ter po­si­tion to pro­ceed than the Scana project.

South­ern se­cured a $3.7 bil­lion pay­ment guar­an­tee from West­ing­house’s par­ent, Toshiba Corp., dwarf­ing the $2.2 bil­lion guar­an­tee for Scana’s project, Wise said in a state­ment on Mon­day.

South­ern also has more coown­ers on the project, and the rate im­pact is spread across a big­ger cus­tomer base.

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