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Southern CEO: Summer-Vogtle comparison is 'apples and oranges'

Southern Co. Chairman, President and CEO Tom Fanning dismissed comparisons of the company's Alvin W. Vogtle Nuclear Plant to the V.C. Summer plant, days after the latter's expansion was abandoned by two South Carolina utilities.

"There are a host of differences between our project and the Summer project," Fanning said on an Aug. 2 earnings call. "It really is apples and oranges."

Despite both plant expansions using the AP1000 reactor design of bankrupt contractor Westinghouse Electric Co. LLC, Fanning cited the "very different" commercial terms of the respective projects, along with different engineering, procurement and construction costs; guarantee amounts by Westinghouse parent Toshiba Corp.; and regulatory processes.

"I really want to resist a reconciliation where [Summer co-owner SCANA Corp.] is relative to where we are. Stick with our numbers," Fanning said.

"I really don't know the process SCANA went through in developing their estimate," he continued. "I can tell you that not only did our on-site people work very hard to develop estimates, we brought in a variety of external parties, including folks that had been involved in the recent nuclear completion projects at [the Tennessee Valley Authority], as well as estimates from [Bechtel Corp.] and [Fluor Corp.]"

Bechtel and Fluor in May were reportedly preparing bids to take over Vogtle construction, but Southern subsidiaries Georgia Power Co. and Southern Nuclear Operating Co. recently entered into an amended services agreement to assume project management from Westinghouse.

Fanning said Georgia Power has been "working hand in glove" with the other Vogtle owners — Oglethorpe Power Corp., the Municipal Electric Authority of Georgia and Dalton Utilities — to evaluate whether to pursue completion or abandonment of the expansion.

"You should assume that we have considered the entire waterfront of options available to us, and we've been pretty creative in pushing a lot of different ideas," Fanning said. "I would expect that the results will converge on a single idea, and we will provide that idea as a recommendation to the Georgia Public Service Commission some time this month."

"I think the commission has been very vocal about their desire for a reasonable outcome on nuclear," he later added. "We already have a strong framework for recovery. We entered into that when we had the settlement agreement and the prudence proceding. So we have a process that works."

Fanning said that if Georgia Power were to abandon expansion, the company would replace that capacity with natural gas. But a new facility would not be built at the Vogtle plant — unlike in Mississippi, where Southern subsidiary Mississippi Power Co. suspended gasification operations and continued operating the combined cycle portion of Plant Ratcliffe in Kemper County.

Southern recently gave Mississippi Power a $1 billion equity infusion to cover Kemper costs, but now the parent company needs a $1 billion infusion of its own, Fanning said. That need is "unrelated" to the timings of a Kemper settlement and whether Vogtle is completed or abandoned, he said.

"The Vogtle go or no-go decision certainly has potential implications to our long-term financing plans," Fanning added.

Federal outlook

A possible lifeline for Vogtle could be an extension of federal production tax credits, or PTCs, for nuclear projects beyond a 2021 deadline. Southern's most recent assessment estimates a Vogtle unit 3 in-service date between February 2021 and March 2022, and between February 2022 and March 2023 for unit 4.

Net of Toshiba's $3.68 billion guarantee to cover the Vogtle owners' costs, of which $1.7 billion would go to Georgia Power, Fanning said the utility will end up spending $6.68 billion to $7.38 billion on the project.

Outside consultants have told Georgia regulators they believe units 3 and 4 will go online in June 2022 and June 2023, respectively. Their report said it would be "uneconomic" to complete the plant's expansion and forecast Georgia Power's total capital cost at $8.44 billion.

From 2009 through 2016, the utility has spent $5.16 billion on Vogtle. The cancellation cost to Georgia Power of the utility abandoning expansion would be $400 million, Fanning said.

The U.S. House of Representatives in June approved a PTC bill. Although the legislation has stalled in the Senate, Fanning said he believes it will pass.

Fanning also gave credit to the White House for its reported effort to ensure an American or allied buyer for Westinghouse, instead of a Chinese-linked company.

"I want to throw some kudos out to the current administration," he said. "Boy, people don't say that very often these days. But let me tell you, as we have traveled around the globe, making sure that we get the best outcomes possible ... the Trump administration cabinet has been fantastic."

Referring specifically to Energy Secretary Rick Perry, Commerce Secretary Wilbur Ross and Vice President Mike Pence, Fanning said they and their staffs "have been exceedingly helpful in helping us prosecute our interest here."