The recently-announced agreement that will make Westinghouse Electric Co. (WEC) the sole contractor overseeing Vogtle Units 3 and 4 is good news for Georgia Power and its partners in the new nuclear reactors, Southern (NYSE:SO) CEO Thomas Fanning told financial analysts Oct. 28.
Fanning took many questions on the just-announced settlement between the Vogtle ownership group and contractors Westinghouse and Chicago Bridge & Iron (NYSE:CBI), during Southern’s quarterly earnings call.
CBI announced Oct. 27 that it had agreed to a transaction where Westinghouse will acquire all of the outstanding equity interests in CBI’s nuclear construction business.
Under the agreement, WEC will purchase the business of engineering, construction, procurement, management, design, installation, start-up and testing of nuclear-fueled facilities, including the V.C. Summer project in South Carolina, the Vogtle project in Georgia and the nuclear projects in China.
WEC also is acquiring CBI’s nuclear integrated services business, which includes small capital projects for existing nuclear plants in the U.S.
Westinghouse will buy the Stone & Webster unit from CBI. It will remove a “lingering concern over contractor financial ability,” Fanning said.
Fanning said the transaction, coupled with a settlement to resolve outstanding litigation on Vogtle construction is tremendous news, Fanning said. The Southern CEO said he has long believed that the biggest issues were disagreements “between the contractors themselves.”
Georgia Power and the other Vogtle co-owners (Oglethorpe Power Corp., Municipal Electric Authority of Georgia and Dalton Utilities) have agreed on terms to settle all claims.
The deal sets Georgia Power’s portion of settlement cost at roughly $350m. Looking at the cash impact, Southern could have been on the hook for a potential $714m in delay-related expenses, officials said during the call.
Fanning said Georgia Power has already paid $121m in “disputed invoices.” A part of the $350m involves $114m paid over time with a portion tied to initial fuel load for each unit. The units are now scheduled to go commercial in 2019 and 2020.
After the settlement, projected rate impacts remain well within the earlier 6% to 8% range, Southern officials said. About 4.5% has already been figured into Georgia Power’s electric rates.
The Georgia Public Service Commission has been briefed on key terms of the agreement and the initial reaction was positive, Fanning said.
When asked to elaborate on the contractor settlement, Fanning said the new arrangement offers more clarity on what costs rest with the owners as opposed to the contractor.
“We are much better off” now that Westinghouse is no longer “co-dependent” with CBI, Fanning said. The Southern CEO also said the construction workforce on-site largely transfers from CBI to Westinghouse.
Westinghouse is in negotiations with Fluor Corporation that, if successful, would result in Fluor (NYSE:FLR) hiring and managing the construction workforce on these two new U.S. nuclear projects, Westinghouse has said.
Westinghouse is a group company of Toshiba Corp.