SCANA and Santee Cooper announced today they have reached agreement with Westinghouse Electric Co., which has filed for Chapter 11 bankruptcy protection, to continue work on two reactor units under construction at V.C. Summer Nuclear Station.
The utility companies said the agreement was reached while working with Westinghouse in anticipation of its bankruptcy filing. The agreement, subject to bankruptcy court approval, allows for a transition and evaluation period during which SCANA and Santee Cooper will assess information provided by Westinghouse and determine how they’ll proceed on the project, according to a press release.
"This agreement with Westinghouse allows progress to continue to be made on-site while we evaluate the most prudent path to take going forward," SCANA chairman and CEO Kevin Marsh said in a statement. "Fluor will continue as the construction manager during this period and they continue to work towards completion of the units."
Lonnie Carter, president and CEO of state-operated Santee Cooper, said in a statement that the agreement will provide SCE&G and Santee Cooper the time necessary to perform due diligence related to cost and schedule. “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," Carter said.
The companies are building two 1,117-megawatt reactor units at the Fairfield County power plant where they presently operate one nuclear unit that went into commercial operation in 1984.
The $13.9 billion project is more than $2 billion over the original budget approved by state regulators in 2009, and about three years behind schedule. SCANA’s principal subsidiary, S.C. Electric & Gas, owns 55% of the project and Santee Cooper’s share is 45%.
Westinghouse has provided SCE&G with revised in-service dates of April 2020 and December 2020 for Units 2 and 3, respectively, the Cayce-based utility said in an earlier news release.
Besides the S.C. project, Westinghouse is the contractor and designer for two reactor units under construction at Georgia Power’s nuclear plant near Waynesboro, Ga.
Toshiba, Westinghouse’s parent, announced in February that it was writing off $6.3 billion in business because of losses incurred by Westinghouse in new nuclear construction projects in the United States and China. However, Toshiba and Westinghouse indicated they were committed to completing the reactor units under construction at the U.S. plants.
In December 2015, Toshiba’s credit ratings slipped into speculative grade, triggering a provision in SCANA’S contract requiring Westinghouse to establish a surety bond in the form of a letter of credit ranging up to $100 million, Marsh said during a February call with analysts.
Additionally, SCANA began to escrow intellectual property and software for the reactor units, Marsh said. Should SCANA need access to the design and software, the ability to call on the letter of credit would help in transitioning to a new construction team, he said.
“Under this scenario, we could evaluate options of serving as a general contractor, entering into a new EPC (engineering, procurement and construction) contract for the remainder of construction or entering into a procurement and construction contract and supply the engineering support ourselves or through a third-party engineering firm,” Marsh said.
State law also would allow SCANA to abandon the project.
Abandonment is not “high on our list,” Marsh said. “We would certainly like to finish these projects; they are critical to us over the long term and meeting customers’ needs and the growth we expect to see in the state of South Carolina.”
Westinghouse announced this morning that it was undertaking strategic restructuring “as a result of certain financial and construction challenges” in its U.S. power plant projects.
In addition, Westinghouse said it had obtained $800 million in debtor-in-possession (DIP) financing from a third-party lender to help fund its core businesses during reorganization. The Chapter 11 filings were made in the U.S. Bankruptcy Court for the South District of New York.
The DIP financing also will help support Westinghouse’s nuclear fuel and components manufacturing and engineering as well as decommissioning, decontamination, remediation and waste management. Westinghouse operate a nuclear fuel fabrication plant on Bluff Road that employs about 1,000 workers.
Reports of Westinghouse’s Chapter 11 filing prompted South Carolina Gov. Henry McMaster to issue a statement in support of the nuclear project.
"Completion of the reactors at V.C. Summer Nuclear Station will provide our state with clean and plentiful electricity for generations to come,” McMaster said. “They are critical components to our future economic prosperity. I have spoken with (U.S. Department of Energy) Secretary Rick Perry and received briefings from the chief executive officers of the utilities involved, and will closely monitor the situation in the days and weeks to come. I am confident that the plans and contingencies they have prepared will result in the completion of the project.”
Fluor, which recently was brought on to manage the project, will continue to support SCANA, Santee Cooper, and Westinghouse on the project “as the parties work through the current situation,” Fluor chairman and CEO David Seaton said in a statement. “We remain committed to the successful completion of this important project."
The Westinghouse Chapter 11 filing occurred a day after Tom Clements, a Columbia resident who has represented environmental groups as an intervenor before the state Public Service Commission in the V.C. Summer project, petitioned regulators to hold an emergency hearing “regarding troubling situation with SCE&G's nuclear construction project” and the impact of Westinghouse’s financial situation.
“In any event, bankruptcy would impact how SCE&G, Fluor and Westinghouse bear the costs incurred until now and into the future (if the project continues),” Clements said in the document. “Exposure by SCE&G to run-away costs, which would be partially caused when the project extends beyond 2020, may threaten the company's viability.”
SCANA said it will host a call with financial analysts at 3 p.m. today to provide an update on the impact of Westinghouse's bankruptcy on the new nuclear project.