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Oglethorpe reviewing decision on finishing Vogtle nuclear plant expansion: CEO

Washington — Electricity cooperative Oglethorpe Power is reviewing whether it will support going forward with the Vogtle nuclear plant expansion in Georgia following an increase in costs, CEO Mike Smith said Thursday. He said the company thinks costs may climb further.

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The company's board of directors will vote on whether to support project completion before the end of September, although no specific date for the decision has been established, he said during a conference call with analysts and reporters to discuss the co-op's second-quarter 2018 earnings.

All three main partners in the $22 billion Vogtle nuclear plant expansion must agree this fall to complete the project or it will be halted, officials said last week when they announced a revised cost estimate.

Southern Co., the parent of Georgia Power, which owns a 45.7% stake in the project, said the subsidiary's share of the revised cost estimate for completing Vogtle-3 and -4 in Georgia has climbed to $8.4 billion from $7.3 billion, not including some offsetting payments from Japan's Toshiba.

Costs on the effort to add two AP1000 reactors at the site of two operating units have ballooned from original estimates of $14 billion as the project faced first-of-a-kind design, procurement and construction problems over the past decade. The delays and cost overruns triggered the bankruptcy reorganization of the main contractor and reactor vendor Westinghouse, which had guaranteed a fixed-price contract for Vogtle and a similar effort to add two AP1000s at South Carolina Electric & Gas's Summer station.

Before it emerged from bankruptcy this year with new ownership, Westinghouse was owned by Toshiba.

Oglethorpe's Smith said he would not be commenting on the decision the company will make on whether to continue to build the units. However, in response to a question, he said it would not make sense to complete just a single reactor at Vogtle, since the second unit is being built more efficiently because of lessons learned as the project has proceeded.

Smith said the project owners asked for a new cost estimate due to their construction experience since they took over management of the work from Westinghouse last year. The estimate shows capital costs for the expansion have increased by $1.5 billion since they were last assessed late last year. Oglethorpe's share of that increase is $450 million, Smith said.

Oglethorpe had estimated its 30% share of project costs, including financing and a $490 million contingency, was $7 billion, Smith said. While the contingency will be enough to cover the latest increase in capital costs, it will leave the company with little room to account for other costs and future increases, he said.

So Oglethorpe is reviewing what its new budget should be. The ultimate cost forecast for its share of Vogtle-3 and -4 will likely be in a range of $7.25 billion to $7.5 billion, Smith said.

At the high end of the range, that would mean the project would end up costing more than $25 billion overall.

MEAG Power holds 22.7% of the Vogtle expansion and Dalton Utilities owns 1.6%.

The cost estimate increased after the finalization of contracts with construction manager Bechtel and dozens of subcontractors, Smith said. In addition, labor incentives, including per diem bonuses being paid to electricians and pipefitters in an effort to attract the needed numbers of such workers to the project, have raised costs, he said.

Work on the site continues to advance, with 7,000 workers laboring on the project, Smith said. Southern Co. CEO Thomas Fanning said last week one of the challenges faced by the project is securing enough electricians and pipefitters to help install miles of piping and cable as the plant moves from civil construction to equipment installation.

The first 1,150-MW nuclear unit is expected to be in commercial operation in November 2021, with the second one scheduled to follow a year later, Smith said. The in-service dates are unaffected by the cost estimate increase, he added. --William Freebairn, william.freebairn@spglobal.com

--Edited by Keiron Greenhalgh, newsdesk@spglobal.com