The owners of the new reactors being built at the V.C. Summer Nuclear Station said Wednesday work will continue as they evaluate whether to complete the $14 billion project after primary contractor Westinghouse Electric Co. filed for bankruptcy protection.
SCANA Corp., the parent of South Carolina Electric & Gas, is a partner in the project with Moncks Corner-based Santee Cooper. Both utilities reaffirmed their commitment to the delayed expansion, but SCANA CEO Marsh said they will need to evaluate more financial details before a final decision is made.
"It's pretty clear from the filing that they're looking for us take over the project," Marsh told analysts during a conference call Wednesday, referring to Westinghouse.
The SCANA chief said his preference is to complete the new reactors, but acknowledged that abandoning the Midlands project is a possibility.
"It's way too premature to say that's the option we're going to end up with," he told analysts.
SCANA will need least 30 days to comb through documents that are becoming available to determine "the most prudent path to take going forward," Marsh said. It will report its findings to state regulators and investors as quickly as possible, he added.
“We’re going to have access to information we have not seen heretofore,” Marsh said.
Santee Cooper said it will spend up to $250 million over a period of up to 90 days to keep V.C. Summer construction on track. The state-owned utility's board authorized the spending during a special meeting Monday but did not release details until after the bankruptcy was filed.
“This agreement will provide SCE&G and Santee Cooper the time necessary to perform due diligence related to cost and schedule," Lonnie Carter, CEO of Santee Cooper, said in a statement. "It gives us critical direct access to resources and information that Westinghouse had not provided us to date, which will be important as we plan for the future of the project.”
SCANA also will pay an undisclosed amount to move construction forward during the study period.
About 5,000 workers are assigned to the Fairfield County project near Jenkinsville.
“As far as I know, all of those vendors are still performing,” said Steve Byrne, chief operating officer at SCE&G.
SCANA is responsible for financing 55 percent of the expansion of the Jenkinsville plant. Santee Cooper is paying for the other 45 percent. They are among Westinghouse's largest creditors because of the uncompleted work at V.C. Summer.
The ailing contractor filed for bankruptcy protection early Tuesday morning in New York. The move essentially freezes all litigation and efforts to collect debts. It also buys Westinghouse time to restructure its balance sheet.
"Today, we have taken action to put Westinghouse on a path to resolve our ... financial challenges while protecting our core businesses," Jose Emeterio Gutierrez, interim president and CEO, said of the bankruptcy filing. "We are focused on developing a plan of reorganization to emerge ... as a stronger company while continuing to be a global nuclear technology leader."
Westinghouse, a subsidiary of Japan's Toshiba Corp., has obtained $800 million in financing from a third-party lender to help fund and protect its core businesses during its reorganization.
The impact on customers of SCE&G and Santee Cooper has not been determined.
"The big question here in South Carolina is if the project will be shut down entirely or will the chaos of bankruptcy and reorganization lead to a long period of project restructuring uncertainly and more spiraling costs?" said Leslie Minard, founder of a consumer group opposed to the nuclear project's cost. "Either way, the ratepayers are being set up to take it on the chin, and we must fight back against that outcome."
The Westinghouse bankruptcy filing could force utility customers to pay higher rates to cover the ballooning cost overruns at V.C. Summer and it could alter the terms of a "fixed-price" contract that's in place to cap the project's expenses.
Santee Cooper is conducting a study to determine whether it will need to increase power prices to help pay for the new reactors, but that review is not related to any additional costs a Westinghouse bankruptcy could bring. Santee Cooper increased rates by 3.7 percent in both 2016 and 2017 to help pay for the new units.
SCE&G has raised electric prices nearly 20 percent since 2009 to fund the nuclear project.
Further delays and higher costs also would crimp the utilities' earnings, hurt investors and lead to a protracted and expensive legal fight with Westinghouse, analysts say.
The nuclear project has been beset by financial and construction problems. The current cost estimate for the reactors is 21.6 percent higher than an original $11.4 billion price tag. Construction also is years behind schedule, with the latest estimate putting the first reactor online in April 2020 and completion of the second unit delayed to December 2020.
Financial analyst group Morgan Stanley estimated the project, if completed, ultimately could top $19 billion — nearly double the original price tag — because of price hikes associated with a bankruptcy.
Dennis Pidherny, a managing director at Fitch Ratings, told the New York Times that it was possible that the company’s bankruptcy filing could terminate the V.C. Summer construction contract and that it could be difficult for the utilities to find another builder to take them over.
“There’s still quite a bit of work that needs to be completed,” Pidherny told the newspaper. “The biggest challenge there is quite simply finding another suitable contractor who can complete the contract and have it completed at a quote-unquote reasonable cost.”
The bankruptcy also threatens to disrupt construction of the Alvin W. Vogtle nuclear plant Westinghouse is involved in near Waynesboro, Ga. Officials there say they will assess in coming weeks whether it makes financial sense to complete the project.
Toshiba has said Westinghouse-related liabilities totaled $9.8 billion as of December. As a result, Toshiba said it will book a net loss of $9 billion for its current fiscal year, which ends Friday. That is one of the biggest-ever annual losses for a Japanese company.