As many of you know, Washington guaranteed $8.3 billion in loans to local utilities for the construction of two new reactors (Units 3 & 4) at the Vogtle nuclear power plant near Waynesboro, Georgia. This guarantee was through the DOE (Department of Energy). In fact, when all the dust settled Southern Company was the only utility that took advantage of the six guaranteed loans available through the 2005 Energy Act.
These two plants are being built by Westinghouse and they are the “new generation” reactor plants of the Westinghouse AP1000 design. However, Toshiba is the owner of Westinghouse and they are facing severe financial difficulty. The Japanese conglomerate and its subsidiary are exploring an overhaul that could include having Westinghouse file for Chapter 11 bankruptcy protection.
Construction of these units has been delayed in the past and is now targeted for completion in 2020. Recent delays were attributed to tighter American nuclear safety regulations enacted following the March 2011 disaster at Tokyo Electric Power Co. Holdings’ Fukushima Daiichi plant in Japan. Toshiba is expected to book a charge of more than 700 billion yen ($6.1 billion) for the year ending March 31 in connection with soaring labor and materials costs, some of which is attributed to the new construction at Vogtle.
It is estimated that around 80% of the guaranteed loan amount for Vogtle has already been put toward purchasing materials and securing labor. Bankruptcy proceedings could put the Vogtle project further behind schedule. If so, the utilities’ repayment of the loans could face heavy delays and in that case, the U.S. government — and ultimately the American taxpayer — could be forced to take on part of those obligations.
Massive impairment losses on Westinghouse’s nuclear operations, which included the Vogtle project, came to light at the end of 2016. Toshiba is expected to announce its plans on how they will rebuild the nuclear business, alongside earnings for the nine months ending in December. These could include the sale of Westinghouse shares. But the situation could grow more complicated if Washington becomes involved.
