A Crack in Co-Owner Support for Vogtle, as Costs Skyrocket
(APN) ATLANTA — As the cost projections for the nuclear reactors 3 and 4 at Plant Vogtle continue to skyrocket, co-owner support for Plant Vogtle is on increasingly shaky ground, especially as credit rating agencies are talking downgrades based upon the instability of cost projections around finishing the reactors.
Georgia Power’s announcement last month of an unexpected increase of 2.3 billion dollars more to complete Vogtle 3 and 4 has triggered confusion and the requirement for a vote by each of the co-owners on whether to continue participating in the project by late September 2018.
Georgia Power cannot assure that the price will not continue to go up or that the service date will not continue to be kicked down the road by ongoing delays.
This has spooked both Wall Street and some minority co-owners of Vogtle 3 and 4.
Moody’s Investors Services has already issued a downgrade to Georgia Power’s rating, saying the 2.3 billion dollar increase comes just eight months after the Georgia Public Service Commission signed off on the previous round of increased cost estimates.
Co-owners’ exposure to cost increases has no actual end in sight, and this has consequences for investors. Additional downgrades for co-owners are expected.
Now, Jacksonville Electric Authority (JEA) wants out of its agreement with Municipal Electric Authority of Georgia (MEAG) to buy power from Plant Vogtle 3 & 4 for the next twenty years and to share in the construction cost. MEAG is one of the co-owners of Vogtle 3 and 4, owning 22.7 percent of the project.
In addition, Oglethorpe Power–a thirty percent co-owner–will have to nearly exhaust its 490 million dollar contingency fund, according to a company press release.
The Oglethorpe Power Board of Directors plans to vote on whether to continue with the project, according to an account of an August 16, 2018 investor call reported in the World Nuclear News.
The co-owner votes are triggered by a clause in the Vogtle Joint Ownership Agreement that defines what counts as a “Project Adverse Event,” or PAE. Both the increase itself, and Georgia Power’s decision in August 2018 to not seek recovery of the latest cost increase from shareholders, constitute PAE’s, according to World Nuclear News.
JACKSONVILLE ELECTRIC AUTHORITY AND MEAG
In a strongly worded letter dated August 17 from Aaron Zahn, Interim Director and CEO of JEA, to James Fuller, President and Chief Executive Officer of MEAG Power, Zahn cites escalating costs, construction delays, loss of economic feasibility, lack of transparency, potential mismanagement, and not getting requested information as some of the reasons for wanting to cancel the project.
In the letter JEA demands that MEAG vote to cancel the project. “If you vote to go forward, you will approve a revised project budget,” it warns.
“Any vote to continue this project ignores well-documented facts and is contrary not only to the interests of JEA and its constituents, but also to the interests of MEAG’s own constituents and their ratepayers,” the letter states.
“Industry experts, analysts and the Georgia PSC’s own staff have all concluded that continued construction and operation of these nuclear facilities is no longer economically feasible,” the letter states.
“The latest cost overruns add an estimated $10 Million annual Power Purchase Agreement (PPA) expense to JEA’s ratepayers that can be replaced at a fraction of the cost for power that may never be produced,” the letter states.
MEGA responded with its own letter to JEA, dated August 24, calling JEA’s letter “baseless threats and filled with factual errors,” as reported in Jacksonville.com
JEA has been seeking legal ways to get out of the agreement with MEGA.
MEGA’s letter indicates walking away from the project would prove difficult. “We will not violate the principles we have laid out here because of baseless threats and we, too, reserve the right to pursue all of the remedies available to us at law and equity,” CEO James Fuller wrote.
Now, JEA has asked for the co-owners’ votes to be held on or after October 31, 2018 to give time for conversations about resolving the issue. JEA believes the September vote was scheduled because of the closing date for an additional 3.7 billion dollars in loan guarantees from the DOE, as reported in the Florida Times Union newspaper.
“MEAG Power and Dalton Utilities are likely to face bond rating downgrades if they absorb the rising costs,” as reported in Zacks.com an Investment Research Group. Dalton Utilities owns 1.6 percent of the Vogtle 3 and 4 project.
JEA could pay four billion dollars over twenty years if they continue with the project; and that has utility officials and credit rating analysis worried. They could save between 345 million and 727 million dollars by getting out now, before they pour more good money after bad.
JEA would still be on the hook for 1.5 billion dollars if Vogtle is canceled, versus 2.25 billion if the project moves forward, according to an analysis by Navigant, a Chicago-based consulting firm.
After looking at financial analyses prepared by utility lawyers, they decided that it is less expensive for their customers to get power elsewhere and not pour 2.5 billion more into this project that is only fifty percent complete after nine years.
Oglethorpe’s share of the project increase is estimated to be 450 million dollars.
According to an Oglethorpe press release, its contingency fund contains just over that amount, at 490 million.
“Oglethorpe anticipates having to increase its budget for Vogtle to the region of USD 7.25 to 7.5 billion if the project continues,” Oglethorpe CEO Smith said on the investor call, according to World Nuclear News.
“Georgia Watch’s position is that it is too expensive to go on and with the announcement of the additional 2.3 billion dollars… that is why the owners are having to reconsider their vote to go forward with the project,” Liz Coyle, Executive Director, Georgia Watch, tells Atlanta Progressive News.
Recently, a coalition of progressive and conservative organizations have written letters to U.S. Congress asking them not to give 3.7 billion dollars more in corporate welfare to Plant Vogtle at taxpayers’ expense.
(END / Copyright Atlanta Progressive News / 2018)