Government's offer of Vogtle loan guarantee extended

Wednesday, June 6, 2012 5:24 PM
Last updated Thursday, June 7, 2012 5:48 AM
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An $8.3 billion federal loan guarantee to help finance Plant Vogtle’s nuclear expansion might not be completed by the end of June, as Southern Co. officials had hoped.

“The Department of Energy has extended the conditional commitment until the end of the year,” company spokesman Steve Higginbottom said. “The company and DOE are continuing negotiations on the terms of the loan guarantee, and the resolution of these negotiations will determine the ultimate schedule for closing.”

Southern Co. subsidiary Georgia Power Co. and nuclear partners Oglethorpe Power and MEAG were conditionally approved in February 2010 to receive up to $8.32 billion for the $14 billion Vogtle expansion. The sum includes $3.46 billion for Georgia Power, $3.05 billion for Ogle­thorpe and $1.80 billion for MEAG.

Under the loan-guarantee program, the government promises to assume a company’s debt if the company defaults.

Because of the huge costs of new nuclear reactors, the loan guarantees were designed to make it easier for energy companies to undertake such projects.

More than two years after the conditional offer was announced by President Obama, however, the loan has yet to close, with proprietary details of the negotiations kept secret.

The government’s offer was to expire about 90 days after the Vogtle expansion received its operating license in February, and company officials had said an agreement would be reached during the second quarter of 2012.

Concerns about the loan guarantee were voiced in testimony before the Georgia Public Service Commission.

Philip Hayet, a power systems consultant monitoring the Vogtle project as a public interest advocate for the commission, said it is possible the government’s proposed terms are stricter than company officials expected.

“If so, it is possible that the company may not enter into an agreement and the assumed DOE benefit would go away,” he said, adding that the company itself has acknowledged uncertainty about completing an agreement.

Other recent developments involving the Vogtle expansion include about $900 million in added construction costs proposed by the contractor consortium Westinghouse and Stone & Webster Inc., of which Georgia Power’s share would be about $400 million.

“We are in negotiations with the consortium, but it is the company’s position we do not agree with that amount and it is not the responsibility of the co-owners,” Higginbottom said, adding that the price increase should not be characterized as a cost overrun, since the project is still within budget.

Georgia Power’s PSC-certified cost – $6.1 billion – remains achievable, he said, and the company will be able to provide $2 billion in customer benefits.

Hayet, however, told the Public Service Commission that some of those benefits might have been overstated.

Even with those concerns, the project retains full staff support, he said, adding that “staff also continues to emphasize the need to manage the project prudently, and to avoid completion delays and cost overruns, which could lead to the economic benefits of the project either being eroded or possibly being eliminated entirely.”


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