Moody’s Investors Service said March 4 that a recent request that Southern (NYSE:SO) subsidiary Georgia Power made with the Georgia Public Service Commission could be a positive development for the financial implications of the utility’s ongoing nuclear plant construction.
On Feb. 27, Georgia Power (currently rated A3 stable by Moody’s) asked the Georgia PSC to certify the higher cost estimates and revised schedule recently provided by the contractors on the Vogtle new nuclear construction project.
“Under a 2013 stipulation between Georgia Power and the GPSC that we viewed as credit negative, the GPSC is not required to certify such cost increases until after completion of the first of the two new nuclear units,” Moody’s said March 4.
“We would view GPSC acknowledgment and certification of the revised Vogtle nuclear project costs and schedule as credit positive and an important part of the ongoing regulatory support and validation process,” Moody’s added.
This request follows Georgia Power’s announcement on Jan. 29 that it had been notified that the Vogtle contractors had revised their forecast for project completion by 18 months, delaying the estimated in-service dates of Unit 3 (the first of the two units) to 2Q 2019 from 4Q 2017 and Unit 4 to 2Q 2020 from late 4Q 2018, Moody’s said.
Georgia Power estimates that the latest schedule delays will result in an increase in its capital costs of approximately $10m per month and an increase in its financing costs of approximately $30m per month, for a total cost increase of $720m, Moody’s said.
“Georgia Power’s capital cost will now be $5.045 billion, up from $4.4 billion originally. Including the additional financing costs, the total project cost will now be approximately $7.5 billion,” Moody’s said.
In its latest semi-annual Vogtle Construction Monitoring (VCM) report filed with the state PSC, Georgia Power requested that the PSC verify and approve $169m of capital expenditures incurred on the project during the last six months of 2014.
Despite the cost increases and schedule delays that have occurred, the utility continues to enjoy strong regulatory support for the project, with all eleven previous VCM reports unanimously approved by the five-member PSC. “In total, the GPSC has verified and approved $2.8 billion of capital costs associated with the project, representing approximately 55% of the total capital costs,” Moody’s said.
In the latest filing, Georgia Power also requested that the PSC amend the certificate of public convenience and necessity it originally granted for the Vogtle project to reflect the contractor’s new schedule and forecast of expenditures.
“Such an approval would not only better reflect the current capital cost expectations for the project, but also permit the company to recover the additional financing costs in rates as construction of the plant proceeds, rather than after the first of the two new units is completed,” Moody’s said.
“Such ongoing recovery would continue to help Georgia Power maintain its financial profile and credit metrics over the course of the longer construction period and demonstrate continued regulatory support for the Vogtle project,” Moody’s said.