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Highlights

Oglethorpe Power, a 30% owner of the Vogtle nuclear plant expansion project in Waynesboro, Georgia, is seeking up to $1.6 billion in additional loan guarantees from the federal government to help them complete the two reactors being built there, executives said Thursday.

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The power cooperative and two of its partners in the project already have a total of $8.3 billion in loans guaranteed by the US Department of Energy.

The future of the 2,300-MW plant expansion has been thrown into doubt by cost overruns that triggered the bankruptcy of general contractor Westinghouse, which had offered a fixed-price contract for the two new reactors.

Georgia Power, the Municipal Electric Authority of Georgia, Oglethorpe and the city of Dalton, Georgia, are deciding whether to go forward and complete the partly built units or walk away from the project as costs have climbed to more than $20 billion from $14 billion.



A decision from Georgia Power -- the lead partner in the effort and holds a 45.7% stake in Vogtle -- is expected by the end of the month.

Two South Carolina power companies July 31 walked away from the similar two-unit expansion of the Summer station in Jenkinsville, South Carolina, saying the risks of further cost overruns and the lack of a fixed-price contract made finishing the units too risky.

State officials are exploring ways in which that project could be re-activated with new partners.

Oglethorpe has submitted an application for $1.5 billion to $1.6 billion in new loan guarantees should it decide to complete the Vogtle expansion, company CFO Betsy Higgins said on a conference call with analysts Thursday to discuss second-quarter financial results.

The company already has $3 billion in loan guarantee commitments from DOE, of which it has drawn $1.7 billion so far, Higgins said.

Because the future of the project remains in limbo, DOE has halted new advances on the original loan guarantee until the companies decide whether to go forward with the project, she said.

DOE can ask for repayment of money advanced so far on a five-year repayment schedule of the project is canceled, Higgins said.

The effort to secure an additional loan guarantee must move quickly, Higgins said. Although DOE's loan program office has billions of dollars in remaining loan authority for advanced nuclear projects, the Trump administration proposed in its fiscal 2018 budget request to cancel the program and prevent new loans from being offered after September 30.

"DOE is under a tight timeline," Higgins said.

The two other partners with DOE loan guarantees are also pursuing additional guarantees to support completing the new units, Higgins said. Representatives of Georgia Power and MEAG did not immediately respond to a request for comment.

The loan guarantees were made available in 2005 for companies trying to build next-generation nuclear plants in the US. The federal guarantee reduces the interest rate on the loans, making it less expensive for the project partners to finance the construction effort.

Construction on the Vogtle units has continued despite Westinghouse's filing in March for bankruptcy reorganization. Southern Nuclear Operating Co., like Georgia Power a subsidiary of Southern Company, has taken over construction management with reactor technology company Westinghouse providing services under a new contract.

Costs rose and delays mounted as Westinghouse attempted to build the reactors, which are of a new design known as the AP1000. The project experienced first-of-a-kind licensing, design and supply-chain problems, officials have said.

Because Westinghouse had promised to complete the units for a largely fixed price, the additional costs resulted in its insolvency. Parent company Toshiba, which guaranteed Westinghouse's performance under the contract, has agreed to provide payments of $1.1 billion to Oglethorpe to satisfy the performance guarantee.

The first payment from Toshiba, of about $90 million, is due October 1, Oglethorpe CEO Mike Smith said.

--William Freebairn, william.freebairn@spglobal.com

--Edited by Valarie Jackson, valarie.jackson@spglobal.com