Southern Co plans to complete lone new U.S. nuclear plant project

(Reuters) - Southern Co said on Thursday it would seek to complete two unfinished nuclear reactors in the U.S. state of Georgia despite billions of dollars of cost overruns that pushed the main contractor, Westinghouse Electric Co LLC, into bankruptcy.

The project known as Plant Vogtle is the first new U.S. nuclear power plant to be built since the Three Mile Island accident in 1979, and completing it would provide hope for a struggling U.S. nuclear industry.

Southern said it now expected the two reactors to be completed by the end of 2022. The project was initially expected to produce power in 2016.

The decision by Southern Co’s Georgia Power Co affiliate must be approved by the state’s utility regulator. A decision is expected by February.

The project’s future became uncertain after Westinghouse filed for bankruptcy in March and said it could not complete its fixed-price contract for the plant.

Georgia Power highlighted in a statement Vogtle’s promise to provide clean, stable power for up to 80 years. However, the company also said capital costs to finish the project will total $9.45 billion and ratepayer groups have already mounted campaigns to kill the project.

Vogtle and a similar twin-reactor project in South Carolina known as V.C. Summer were approved a decade ago, and were seen at the time as the dawn of a new era of U.S. nuclear power plant construction.

Both so-called AP1000 plants were designed and being constructed by Pittsburgh-based Westinghouse, a subsidiary of Toshiba Corp of Japan, and were touted as quicker to build and safer than prior plants. Since then, however, cheap natural gas flooded the market, the Fukushima accident in Japan dampened enthusiasm for nuclear power and the Trump administration is now unwinding steps aimed at countering climate change.

Both plants were also dogged by massive setbacks and cost overruns.

In July, the V.C. Summer project was scrapped by its owners SCANA Corp and state utility Santee Cooper.

Unlike V.C. Summer, Vogtle had a larger corporate backer in Southern Co and a $3.68 billion settlement with Toshiba, which promised only $2.2 billion for failing to complete the South Carolina project.

Resolving Vogtle’s future should bolster the image of Westinghouse’s cutting-edge AP1000 design and creates a customer for the company’s services business.

That services business, along with a unit that manufactures nuclear fuel products, generated around $400 million of cash flow in the last fiscal year before bankruptcy and the company has described them as “very profitable” in court records.

With Southern’s commitment to Vogtle, Westinghouse is expected to focus on finding a buyer and is expected to attract interest of U.S. private equity investors.

Southern Co cautioned that the success of Vogtle hinges on ailing Toshiba making good on its settlement, which will be paid in installments, and U.S. lawmakers extending production tax credits.

Vogtle’s success also depends the Department of Energy extending loans to help finance construction.

Georgia Power said Bechtel, a San Francisco-based engineering company, would manage construction.

Reporting by Tom Hals in Wilmington, Del.; Editing by Chizu Nomiyama and Matthew Lewis