Summary
Southern Company (SO) filed an 8-K on March 29, 2017, to report significant developments regarding the construction of Plant Vogtle Units 3 and 4. The filing details that the primary contractor for the project, a consortium led by Westinghouse Electric Company LLC, and its affiliate WECTEC Global Project Services Inc., have both filed for bankruptcy protection under Chapter 11. This event follows Toshiba Corporation's earlier announcement of substantial impairment charges related to Westinghouse's U.S. nuclear projects. In response to the bankruptcy, Georgia Power, acting as agent for the Vogtle Owners, has entered into an interim assessment agreement to allow work to continue on the project during a defined period. This agreement is contingent on a similar agreement for the V.C. Summer project and requires court approval. While efforts are underway to maintain progress, Southern Company acknowledges that the contractor's bankruptcy is expected to materially impact the construction schedule and costs of Plant Vogtle Units 3 and 4, with the ultimate financial outcome uncertain at this time. The company also intends to pursue its rights, including accessing letters of credit and enforcing guarantees.
Key Highlights
- 1Westinghouse Electric Company LLC and WECTEC Global Project Services Inc., the primary contractors for Plant Vogtle Units 3 & 4, filed for Chapter 11 bankruptcy protection.
- 2Georgia Power, on behalf of the Vogtle Owners, has entered into an Interim Assessment Agreement to facilitate continued work on the nuclear units.
- 3The Interim Assessment Agreement is temporary, lasting from its effective date until April 28, 2017, or earlier termination, and is subject to bankruptcy court approval.
- 4Georgia Power will pay $5.4 million weekly for contractor services under the Interim Assessment Agreement.
- 5The agreement allows Georgia Power to pay certain past-due subcontractor and vendor accounts directly.
- 6Southern Company explicitly states that the contractor's bankruptcy is expected to have a material impact on the construction and financial statements, though the ultimate outcome is uncertain.
- 7Georgia Power intends to enforce its rights, including accessing $920 million in letters of credit from Westinghouse and pursuing the Toshiba Guarantee.