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Fate of $28 Billion U.S. Nuclear Project Is Down to ‘Game of Chicken’

The deadline to decide the fate of the only U.S. nuclear power plant under construction has been pushed back again.

Southern Co. agreed to give Oglethorpe Power Corp. until 11:30 p.m. in New York to determine whether to continue with the troubled $28 billion Vogtle project, saying progress is “being made on reaching an agreement to move forward with construction.” It’s the third time the deadline has been extended.

Southern previously said the project — which has doubled in price and is running more than five years behind schedule — couldn’t proceed without Oglethorpe aboard.

“It appears that something like a game of chicken could be under way,” said Paul Patterson, an analyst for Glenrock Associates LLC.

Southern and its partners are the only companies left building reactors in the U.S., and the Vogtle project had been seen as critical to the U.S. nuclear industry’s future. Existing reactors are struggling to compete with cheap natural gas and renewable energy, and efforts to build new ones have all but dried up. Cost overruns forced Scana Corp. to abandon the half-built V.C. Summer project in South Carolina last year.

Shares of Atlanta-based Southern slid 2.5 percent Tuesday to $42.73, the lowest in more than four months.

Trading Barbs

The Municipal Electric Authority of Georgia and Dalton Utilities, the other minority partners, have already agreed to go forward. Oglethorpe initially had a deadline of Monday, when the company offered to move forward with the project if measures were enacted to control costs.

“We are hopeful that the Southern Company will agree with a proposal to protect our rural energy consumers in Georgia who should not be responsible for excessive future increases in the costs of this project,” Oglethorpe Chief Executive Officer Mike Smith said in a statement.

Hours later, Southern shot back with a statement of its own, saying Oglethorpe had “demanded concessions to avoid obligations that it undertook when it became an owner of the project.”

Oglethorpe offered its rebuttal Tuesday morning, saying it wanted to clear up a “misinformation campaign.”

“Let the record show that Oglethorpe Power is far from being obstructionist,” the company said in a statement. “In fact, we have offered Georgia Power and its parent, Southern Company, several options.”

‘7,000 jobs’

Southern assumed responsibility for managing its construction of the project near Augusta, Georgia, after contractor Westinghouse Electric Co.went bankrupt last year.

Costs have ballooned from an initial budget of about $14.1 billion. Southern owns 46 percent of the project, and the Municipal Electric Authority of Georgia has a 23 percent share. Dalton Utilities owns 1.6 percent.

Last week, the U.S. Energy Department warned Southern’s partners against pulling out of the project, saying it would prompt the government to demand repayment of about $5.6 billion in federal loans. The agency said in a letter that the new plant is a “linchpin in the all-of-the-above energy strategy required to sustain our nation’s economic strength and energy independence.”

Pressure has also been building to abandon the reactors. A Florida utility is suing to get out of a contract to buy electricity from the plant. Georgia lawmakers, meanwhile, called last week for a price cap on the project.

Georgia Governor Nathan Deal, a Republican, has lobbied to keep the project alive, saying it would provide economic benefits and carbon-free electricity.

“I also call upon Oglethorpe Power Company to reconsider its decision before walking away from 7,000 GA jobs,” he wrote on Twitter, calling the Vogtle plant “a critical infrastructure and economic development project.”

Source From: https://www.bloomberg.com

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