SCANA, Santee Cooper Buy More Time for V.C. Summer Decision
SCANA Corp. subsidiary South Carolina Electric & Gas Co. (SCG&E) and Santee Cooper-owners of the two-unit expansion of the V.C. Summer nuclear plant-have extended an interim assessment agreement with Westinghouse to allow the project's owners to "continue to make progress on the site."
The companies on June 26 extended the agreement to August 10, but it is subject to bankruptcy court approval.
"The agreement extension allows the co-owners additional time to maintain all of their options by continuing construction on the project, while examining all of the relevant information for a thorough and careful assessment to determine the most prudent path forward," the project owners said.
"The goal is to reach a decision in the third quarter."
A Hard Decision to Make
SCE&G and Santee Cooper have worked with Westinghouse to reach agreement on the project even before the Toshiba company filed for bankruptcy protection in late March. Westinghouse cited liquidity crisis stemming from losses at the V.C. Summer and Vogtle AP1000 projects for its financial collapse.
At first, the V.C. Summer project owners worked to negotiate an agreement that would allow for work on the project to continue toward completion of the two AP1000 units, which are more than 64% complete. Following the bankruptcy announcement, Westinghouse and SCE&G entered into an interim assessment agreement, which was to expire on June 26, that requires all parties to continue to perform under the engineering, procurement, and construction (EPC) contract, while giving Fluor Corp. and other subcontractors relevant project information about the project. The agreement also requires project owners to make weekly payments for work performed during the interim period.
On June 9, meanwhile, Toshiba and Southern Co. subsidiary Georgia Power reached a deal in which Toshiba promised to pay Georgia Power $3.68 billion between October 2017 and January 2021, giving two other beleaguered AP1000 units under construction at Plant Vogtle in Georgia a temporary lifeline. The parties also struck a service agreement to transition construction management of Vogtle Units 3 and 4 to Southern Nuclear Co. and Georgia Power. On June 22, however, Georgia Power (acting for itself and as agent for project co-owners Oglethorpe Power Corp., the Municipal Electric Authority of Georgia, and the City of Dalton) and Westinghouse entered into the sixth extension of an interim assessment agreement for that project, which has allowed construction to continue.
In a footnote in recently filed court documents, Toshiba suggested it is "currently in discussions with the V.C. Summer Owners in an effort to reach a resolution similar to the Vogtle Settlement," the Aiken Standard reported on June 23.
Vogtle project owners say they are continuing to conduct a comprehensive schedule and cost-to-complete assessment, as well as a cancellation cost assessment to determine the impact of Westinghouse's bankruptcy filing on the project. An estimated 64.4% of the project is complete, while construction is 42.7% is complete, Georgia Power told POWER on June 26.
Big Stakes at V.C. Summer
In its first-quarter financial filing at the end of March, SCANA Corp. noted that engineering work on the V.C. Summer expansion project was 96% complete, and procurement was at 88.2%. Construction, however, was only 34.3% complete and start-up was 8.6% complete.
Cancellation of the project is a possibility, though it may be costly for the project owners. Under an October 2015 amendment to the EPC contract with Westinghouse, Toshiba reaffirmed its guaranty of Westinghouse's payment obligations. Toshiba in April, however, announced that it had recorded an impairment charge of about $6.2 billion relating to its nuclear power systems business, leaving it with negative shareholders' equity. In filings with a bankruptcy court, the Japanese conglomerate also said it intends to discontinue its role in the construction of nuclear plants.
SCANA Corp. noted in a financial filing: "As such, there can be no assurance that Toshiba will fulfill its payment guaranty obligations under the EPC Contract."
If the fixed-price terms provided by the EPC contract are lost as a result of the bankruptcy process, SCE&G and Santee Cooper may be forced to assume part of or all cost overruns incurred by Westinghouse. SCE&G, a regulated utility, may attempt to recover costs through rates, but South Carolina regulators would need to approve that measure.
SCANA Corp. had also explored the option of replacing contractors and assuming responsibilities of the contractor under the EPC contract to complete the new units if, as part of the bankruptcy process, the EPC contract is rejected.
Uncertainty Is Frustrating
The lack of certainty has been concerning for several industry entities. For Santee Cooper's biggest customer, the Central Electric Power Cooperative, for example, the full cost to complete the project and a firm timeline for when the job will be completed is integral to operations. According to Lou Green, executive vice president of the Electric Cooperatives of South Carolina, a state trade association for cooperative members, Central bolsters about 70% of Santee Cooper's capital costs as it relates to peak demand.
However, Green told POWER on June 26 that there's doubt "whether a fully resolved schedule exists. [That's] causing frustration to everyone."
-Sonal Patel is a POWER associate editor (@sonalcpatel, @POWERmagazine)
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