18-month delay forecast on completion of Vogtle Units 3 and 4

Southern (NYSE:SO) and utility subsidiary Georgia Power have said in a regulatory filing that their team of contractors has concluded that construction of two new nuclear reactor units will take 18 months longer than expected.

The impact of such a revised timetable means that the expected commercial operation of Vogtle Unit 3 will be delayed from the fourth quarter of 2017 to the second quarter of 2019. Likewise, commercial startup for Unit 4 is delayed from 4Q of 2018 until 2Q of 2020.

Southern made the disclosure in a Jan. 29 form 8-K filed with the Securities and Exchange Commission (SEC).

The SEC filing said that Georgia Power had been notified by vendors Westinghouse Electric and Chicago Bridge & Iron (NYSE:CBI), and CBI subsidiary Stone & Webster of the revised forecast for completion of the units.

“Georgia Power has not agreed to any changes to the guaranteed substantial completion dates,” the utility said in the SEC filing. “Georgia Power does not believe that the Contractor’s revised forecast reflects all efforts that may be possible to mitigate the Contractor’s delay,” the utility goes on to say in the formal filing.

The Southern utility said it and its fellow owners in the two new nuclear units believe that its engineering, procurement and construction (EPC) agreement shows that the contractors are responsible for contractor-related costs connected with such a delay. The utility also believes that the EPC contract entitles the ownership members “to recover damages” for the contractor’s delay beyond “the guaranteed substantial completion dates of April 2016 and April 2017 for Plant Vogtle Units 3 and 4, respectively.”

The owners group and the contractor team continue to be involved in an ongoing dispute over issues connected with delays and costs associated with the delays. Such disputes between developers and their contractors have been known to emerge in the past on other multi-billion infrastructure projects.

“Georgia Power would continue to incur its owner-related costs, including property taxes, oversight costs, compliance costs, and other operational readiness costs, of which Georgia Power estimates its capital cost increase to be approximately $10 million per month until Plant Vogtle Units 3 and 4 are placed in service,” according to the SEC filing.

Georgia Power expects to further address the matters related to cost and schedule described herein in the next semi-annual construction monitoring report for Plant Vogtle Units 3 and 4, which is scheduled to be filed with the Georgia Public Service Commission on Feb. 27, 2015.

Prior to Vogtle Units 3 and 4 being placed in service, Georgia Power would continue to incur financing costs of approximately $30m per month.

Georgia Power will be the largest single stakeholder at 45.7%. Other co-owners include Oglethorpe Power, the Municipal Electric Authority of Georgia (MEAG Power) and Dalton Utilities.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.