Plant Vogtle’s latest delay prompts negative comment on Georgia Power: Moody’s
Editor’s Note: This story has been updated with comments from Georgia Power.
By David Pendered
Moody’s Investors Service on Tuesday released a credit negative comment on Georgia Power, following the company’s announcement last week the first of two nuclear generators probably won’t open as planned in November at Plant Vogtle.
The comment represents a significant warning to investors that the delay is a serious financial consideration facing the nation’s only nuclear reactor project now underway, a project that’s entering its third presidential administration.
One unanswered question is how the state utility regulator, the Georgia Public Service Commission, will respond to the financial setback related to the react not coming online as scheduled. Contingency reserve funds may not be adequate to cover a loss estimated at $25 million a month, according to the analysts’ report.
The latest delay came to light on March 19. Georgia Power and its parent, the Southern Co. filed a federal form notifying interested parties that the first of two nuclear generators likely won’t open as scheduled, in November. The second generator is due online in November 2022. The Form 8-K filed with the Securities and Exchange Commission observes:
- “While Southern Nuclear continues to target a November 2021 in-service date for Unit 3, the schedule is challenged and, after considering the factors above, a delay is likely and could add one month or more to the Unit 3 in-service date.
Georgia Power spokesman John Kraft responded Wednesday to a request for additional information:
“The project team has identified, and is in the process of completing, additional construction remediation work, primarily related to electrical installations, necessary to ensure quality and design standards are met as system turnovers are completed prior to starting hot functional testing and fuel load for Unit 3.
“The new Vogtle units are an essential part of Georgia Power’s commitment to deliver safe, clean, reliable and affordable energy for customers and play a significant role in supporting Southern Company’s goal of net-zero carbon emissions by 2050.”
For their part, Moody’s analysts went beyond this latest potential setback in the construction timeline to provide this cautionary statement over the overall construction project:
- “Southern Nuclear expects Unit 3 fuel load to be this summer, which could take up to six months to complete. Fuel load, when enriched uranium is loaded into the reactor vessel for initial startup, is the last critical milestone prior to the unit’s commercial operation.
- “Nonetheless, the project has challenges, which have been exacerbated by the COVID-19 pandemic, including, but not limited to, higher-than-expected absenteeism, lower overall construction and subcontractor labor productivity, system turnover and testing activities and electrical equipment and commodity installation. As such, there is a risk that additional delays in construction and testing that raise costs for Units 3 and 4 will continue.”
Moody’s latest report tracks the views of a monitor, whose written testimony to the PSC on Nov. 24, 2020 observes that Vogtle is months behind schedule, likely won’t open as scheduled, and is over its approved budget by $1.5 billion to $2 billion. Highlights from the conclusion of the monitor’s testimony observe:
- “With respect to the Regulatory Approved CODs [commercial operation dates] of November 2021[reactor No. 3]and November 2022 [reactor No. 4] although possible, it is highly unlikely that they will be achieved;
- “[W]ith respect to the TPC [total project cost], even if the regulatory approved November 2021 / 2022 CODs are achieved, VMG [the monitor] forecasts that the TPC will be roughly $1.5 B to $2.0 B over the regulatory approved $17.1B.”
The construction delay is caused by a shortage of workers related to the coronavirus pandemic, the companies announced in the SEC filing. The project has been plagued by pandemic-related worker shortages since the pandemic broke out in Spring 2020.
The issuer comment released by Moody’s begins with a headline and observation that notes:
- “Latest delays in remaining key Vogtle nuclear construction activities are credit negative
- “The latest setback is credit negative for Georgia Power because it signals the project’s continued challenges and the likelihood of additional cost overruns and schedule delays in the Unit 3 in-service date. Such delays and cost overruns have the potential to lead to potential cost-recovery disallowances by state regulators. However, we expect key stakeholders, including state regulators and co-owners, to remain supportive of the project.
Pandemic-related construction delays have increased total project has increased by $325 million to $415 million. Delays have used up three to four months of the construction schedule, the analysts wrote, citing a previous statement by Georgia Power.
The SEC filing represents a significant setback from January, when Georgia Power assured customers, and investors, the two nuclear reactors will open on time – the first in November and the second in November 2022.
Kraft noted that direct construction at Unit 3 is now approximately 98% complete, and the project has met milestones that include:
- “Unit 4 Starting Integrated Flush – This test pushes water through the permanent plant system piping that feeds into the reactor vessel and reactor coolant loops. Integrated flush represents a critical step as the process is key to helping ensure the safe startup of Unit 4 and marks the start of extensive testing ahead for the unit’s systems.
- “Unit 3 Nuclear Fuel Receipt – The first nuclear fuel assemblies for Unit 3 arrived at the site in December.
- “Unit 3 Condenser Vacuum Test – The test was conducted with the main turbine on turning gear and by operating supporting systems to establish the condenser vacuum, which is necessary to demonstrate the steam supply and water-cooling systems operate together and are ready to support hot functional testing and initial fuel load in the reactor.
- “Completion of Unit 3 Cold Hydro Testing – Confirmed the reactor’s coolant system functions as designed and verified the welds, joints, pipes and other components of the coolant system and associated high-pressure systems do not leak when under pressure.”