Westinghouse nuclear plant wins approval from Georgia

Company hopes to sell plants in India, Mideast

Plant Vogtle in Georgia — Westinghouse Electric Co.’s last hope for a U.S. showcase of its AP1000 nuclear power plant — will continue construction, delivering a much needed boost for the Cranberry-based nuclear firm.

The news that the project won a key nod from Georgia officials on Thursday was critical for Westinghouse, which is in the throes of a bankruptcy brought about by delays and cost overruns on this very project and its cousin in South Carolina, which was canceled in July.

Industry experts said that if Westinghouse wants to be able to sell any AP1000 plants abroad — as it is vying to do in India and Saudi Arabia — it will need a reference plant in the U.S. Vogtle will serve that function.

Westinghouse is currently working on a proposal, due before

the end of the year, to build two nuclear power plants in Saudi Arabia. Its partners on the bid are Illinois-based utility Exelon, which would operate the plants, and infrastructure firm Fluor Corp., which was briefly in charge of Westinghouse’s U.S. nuclear construction projects until it was replaced by a competitor when Westinghouse’s role at Vogtle was downgraded.

Even with its diminished involvement in Georgia, Westinghouse had a lot at stake in keeping the project alive.

“If Vogtle were to fail, Westinghouse would be under greater pressure to succeed elsewhere and that could have an impact on the outcome of negotiations about future nuclear power plant sales,” said Mark Hibbs, a senior fellow in the nuclear policy program at the Carnegie Endowment for International Peace.

The decision to continue the project, where billions of dollars already had been spent, was far from certain when the vote came before the Georgia Public Service Commission on Thursday.

The commission’s own staff had counseled against the path the commissioners set forth — warning that the utility and its contractors haven’t been able to accurately predict deadlines and costs, and that ratepayers should no longer be on the hook for the companies’ “mismanagement.”

In the end, the commissioners thanked their staff but voted unanimously to continue supporting the plan to build two AP1000 plants near Waynesboro with some conditions that the utility owner, Southern Co., agreed toon the spot.

“History, over time, will show that we were correct,” predicted commission chairman Stan Wise.

The commisson’s conditions include a lower return on equity for Georgia Power, a division of Southern Co.; more money returned to ratepayers; and the possibility of re-examining the project once again if Congress doesn’t extend a production tax credit for nuclear power past its 2021 expiration date. Vogtle’s current in-service date is beyond that.

Nuclear industry proponents were hoping to see the extension as part of the federal tax overhaul signed this week, but were disappointed to find it missing.

There also will be a 5 megawatt community solar project at Vogtle, the commission declared, in an unexpected tangent.

Global considerations

While no one — not the commission, its staff, Georgia Power or many of the opposition groups that urged for the project to be canceled — had much love for Westinghouse (”Let’s be honest,” commissioners Chuck Eaton and Tim Echols wrote in a statement after the vote. “It was the bankruptcy of Westinghouse ... that has put us in the pickle we are in”), the Cranberry-based nuclear firm’s precarious status in the world loomed large over these discussions.

Mr. Eaton and Mr. Echols, for example, wrote, “The United States must maintain nuclear superiority in an age when Russia and China are building dozens of reactors and exporting their technology,” in their explanation of their votes.

Georgia Power made a similar argument in its appeal to the commission earlier this week.

“As the only nuclear units currently under construction in the United States, the project also is important to the country and its nuclear industry as a whole,” the utility wrote, alluding to “far-reaching state and national impacts” from the commission’s vote.

José Emeterio Gutiérrez, president and CEO of the nuclear firm that employs about 11,000 total and 3,400 in Western Pennsylvania, echoed that in his statement on Thursday.

While the Westinghouse executive led with the “thousands of high-paying, longterm jobs required to successfully complete the project,” Mr. Gutiérrez noted, “This is an especially important decision for the U.S. energy sector and the global nuclear energy industry.”

That thread goes beyond keeping American companies competitive with rivals funded by rising powers. The involvement of the U.S. nuclear industry in building and servicing power plants abroad has always had a national security component.

Until recently, the U.S. could throw around its considerable nuclear weight to extract nonproliferation agreements from countries that wanted American nucleartechnology.

Such agreements typically have provisions prohibiting the foreign country from enriching or reprocessing nuclear fuel.

The same technology used to enrich uranium for use in a commercial power plant can be used in service of making weapons-grade material.

“The bottom line is enrichment is enrichment,” said Tom Congedo, associate director of the nuclear engineering program at the University of Pittsburgh who also works on nonproliferation. The difference between running a centrifuge to make commercial nuclear fuel and weapons is running it many moretimes, he simplified.

Given the United States’ long-held stance on disallowing enrichment, it came as a surprisetosomewhoworkonnonproliferation that the government is in talks with Saudi Arabia to sign a so-called 123 agreement that may sidestep the issue in service of getting Westinghouse’s bid to the table. Bloomberg reported on these discussionsearlierthismonth.

“Today a 123 agreement is the basis for U.S. nuclear companies doing business in foreign countries,” Mr. Hibbs said. “If there is such a thing as a ‘gold standard,’ this has been it.”

But previous negotiations with Saudi Arabia to sign such an agreement fell apart over the issue of enrichment, which some countries see as a critical path to secure their own fuel supply.

Westinghouse and Exelon have had their eye on the Saudi market for years.

Fluor, which has a controlling stake in the small modular reactor company NuScale, is already established in Saudi Arabia with infrastructure projects in rail and oil and gas.

“Clearly, if we can get the Saudis to sign the 123 agreement, that kind of opens the door,” Fluor’s chairman and CEO, David Seaton, told analysts during an earnings call in November.

Fluor’s involvement in the Westinghouse bid, confirmed by several sources with knowledge of the proposal, has not been disclosed in Westinghouse’s public bankruptcy documents, even though Fluor is the largest creditor in the proceeding and part of Westinghouse’s unsecured creditors committee.

It also is not clear how the bid is structured — specifically how the risk for delays and cost overruns is split between the consortium.

In light of what happened in South Carolina and Georgia, that is likely to be a key consideration for the three private equity firms that are bidding to buy Westinghouse from bankruptcy.

Westinghouse spokesperson Sarah Cassella said she couldn’t provide any details on the bid.

“Westinghouse pleased that Saudi Arabia has decided to pursue nuclear energy,” she said. “We are fully participating in their request for information and are pleased to provide the AP1000 plant, the industry’s most advanced technology.”