Summary
Southern Co. (SO) announced on September 26, 2018, that its subsidiary Georgia Power, along with joint venture partners Oglethorpe Power Corporation (OPC), the Municipal Electric Authority of Georgia (MEAG), and Dalton Utilities, have voted to continue construction of the Plant Vogtle Units 3 and 4 nuclear project. This decision follows a critical vote required by the project's joint ownership agreements and is accompanied by new term sheets aimed at mitigating financial exposure and clarifying cost-sharing arrangements. The newly agreed-upon terms introduce a revised cost-sharing framework for construction cost overruns. Georgia Power will bear a greater percentage of costs exceeding the initial estimated cost at completion (EAC), particularly for overruns between $800 million and $2.1 billion above the EAC outlined in the 19th Vogtle Construction Monitoring (VCM) report. Importantly, the agreements also modify the conditions under which construction can be halted or the project cancelled, including removing an increase in cost estimates as a "Project Adverse Event" and granting Georgia Power greater discretion to cancel the project. Additionally, arrangements are in place for Georgia Power to purchase Production Tax Credits (PTCs) from other owners under certain cost-overrun scenarios and to potentially provide funding or purchase PTCs from MEAG if certain defaults occur related to the Jacksonville Electric Authority (JEA) power purchase agreement.
Key Highlights
- 1Vogtle Owners vote to continue construction of Plant Vogtle Units 3 & 4.
- 2New term sheets define revised cost-sharing for construction overruns, increasing Georgia Power's responsibility for costs exceeding the projected EAC.
- 3Georgia Power will be responsible for 55.7% of costs exceeding the 19th VCM EAC by $800M-$1.6B, and 65.7% of costs exceeding $1.6B up to $2.1B.
- 4An increase in construction cost estimates no longer constitutes a 'Project Adverse Event,' reducing triggers for potential project cancellation votes.
- 5Georgia Power gains enhanced discretion to cancel the project at any time.
- 6Georgia Power will purchase Production Tax Credits (PTCs) from other Vogtle Owners under certain cost overrun scenarios, with purchase prices varying based on the extent of cost increases.
- 7Agreements include provisions for Georgia Power to potentially fund or purchase PTCs from MEAG if certain defaults related to the JEA power purchase agreement occur.