Plant Vogtle and VC Summer owners are preparing for a potential shakeup in construction contracts ahead of expected heavy losses in the nuclear construction business by the struggling Toshiba Corp.
Each nuclear power plant has two reactor units under construction, all Westinghouse AP1000 designs. Westinghouse is an American subsidiary of Japan-based Toshiba, which is expected to release its third-quarter earnings today. Those earnings, or losses, could affect the contracts at Vogtle, near Waynesboro, and VC Summer, near Jenkinsville, S.C.
Because of its expansion into the American nuclear power arena and its acquisition of Stone and Webster from engineering firm Chicago Bridge & Iron, Toshiba is expected to announce a hefty write-off, potentially in the billions of dollars. The company began warning stakeholders of the news in December.
“Westinghouse has found that the cost to complete the U.S. projects will far surpass the original estimates, mainly due to increases in key project parameters, resulting in far lower asset value than originally determined,” the company said in a release.
Georgia Power, which owns the largest percentage of Plant Vogtle, said it is committed to finishing the new reactors on time.
“We continue to monitor the financial position of Toshiba, which is the guarantor for Westinghouse under our engineering, procurement and construction (EPC) agreement. Under this agreement, Westinghouse has taken the actions required in connection with Toshiba’s financial condition,” a Georgia Power spokesman said.
Vogtle’s two new units are already over budget and past their original 2016-17 deadlines. They are set to begin operations in 2019 and 2020, respectively, and Georgia Power has remained steadfast in claims that those deadlines will be met.
“The EPC agreement continues to protect Georgia Power customers through its firm and fixed nature, and we expect the contractor to employ all possible means to meet the current schedule targets for Vogtle Units 3 and 4,” a company spokesman said.
Not everyone is convinced, including the Southern Alliance for Clean Energy, which in a blog post Monday claimed the “nuclear revival” is ending before it ever really started.
Toshiba bought Westinghouse in 2006 when prospects for a revival of the American nuclear power industry were good. In 2012, the Nuclear Regulatory Commission signed construction and operating licenses for Vogtle’s expansion Units 3 and 4. It was the first such license issued since 1979, but concerns were already mounting.
The earthquake and subsequent tsunami that devastated Japan in 2011 created one of the most prolific nuclear disasters in history. Then, as the oil and gas industry became the cheaper alternative for electricity production, prospects for the “nuclear revival” grew dimmer.
The contract for construction was a fixed-price agreement, which were common among nuclear power plant projects in the 1960s.
The Southern Alliance’s blog post Monday stated, “Similar fixed price contracts had been offered up at the beginning of the nuclear era in the 1960s, and that didn’t end well. … Navigant Consulting found that 13 early plants built by General Electric and Westinghouse had forced the two nuclear developers to subsidize more than a $1 billion in construction costs. … Accounting for inflation that billion would be equal to almost $8 billion today.”
Toshiba’s push into American nuclear construction and the related financial troubles today stem from the purchase of Chicago Bridge and Iron Stone Webster. The two entities have been at odds, even in a courtroom, about the value of the sale and subsequent Toshiba losses. Toshiba said CB&I misrepresented the value of the company.
“Westinghouse has found that the cost to complete the U.S. projects will far surpass the original estimates, mainly due to increases in key project parameters resulting in far lower asset value than originally determined,” the company said in a previous release.
Construction at Vogtle or VC Summer isn’t grinding to a halt amid these financial issues. A Georgia Power spokesman said, “While we cannot speculate on what may happen in the future with Toshiba or Westinghouse and their overall business, we will always hold them, as the contractor, accountable for their responsibilities under our agreement.”
Santee Cooper, one of the large utility company owners of VC Summer, has planned a public meeting about the Toshiba earnings release this afternoon. Georgia Power or other ownership stakeholders don’t currently have public meetings planned.
Westinghouse representatives said the company will not make a statement about the report until after it is released .
Reach Thomas Gardiner at (706) 823-3339 or firstname.lastname@example.org.