Southern Co. says it remains on schedule to complete Units 3 and 4 of the Vogtle nuclear expansion project by November 2021 and November 2022, respectively, despite the impacts of the COVID-19 pandemic.
The company in its 2020 second-quarter earnings report on July 30 said issues associated with the coronavirus have increased subsidiary Georgia Power’s share of total costs of the Vogtle project by about $150 million. Southern said the pandemic’s impact on the parent company’s operations has been less than expected, saying an estimated impact of $250 million to $400 million on its base revenues can be offset through cost containment measures.
The utility cautioned, though, that it expects economic uncertainty will linger over its operations through the end of the year.
Thomas Fanning, Southern Co. chairman, president, and CEO, on Thursday said, “The team at Vogtle Units 3 and 4 continues to work incredibly hard and drive meaningful progress at the site, even while managing through the pandemic. As we neared the final phases of construction for Unit 3 and move closer to fuel load, I can assure you that the construction team, our management team and our partners are more focused than ever on bringing in the first unit of this historic project to completion next year. As we approach the final key milestones, we recognize that the aggressive site work plan is increasingly difficult, as most of our optionality relative to May 2021 in-service day has been utilized. But both, management at the site and workforce remain motivated to pursue the aggressive schedule to provide margin to the November regulatory in-service date.”
About 9,000 workers were at the Vogtle job site prior to the start of pandemic lockdowns. In April, about 2,000 jobs were cut from the project, after absenteeism rose and coronavirus cases grew at the site. Southern said the number of cases among workers declined significantly, but started to increase again in mid-June and “continue to impact productivity levels and pace of activity completion.”
Revenues Down 9.4%
Southern reported operating revenues of $4.62 billion for the second quarter, 9.4% lower than its $5.1 billion figure for 2Q2019. It reported earnings of $612 million for the quarter, compared with $899 million in 2Q2019.
“Despite the challenges of the COVID-19 pandemic, Southern Company and its subsidiaries have never taken a day off,” said Fanning. “Our electric and gas utilities have continued to provide clean, safe, reliable and affordable energy to customers while operating under appropriate health and safety protocols. Whether it’s our response to major storms in the Southeast or working within our communities to promote racial justice, we continue to deliver results, including continued progress on new nuclear construction.”
Southern in its earnings presentation said the company is “focused on meeting November 2021 and 2022 regulatory-approved service dates” for Units 3 and 4 at Vogtle. It said “Aggressive site work plan target in-service dates remain May 2021 and 2022, respectively,” for the units. The company listed start dates for various milestones based on both an “aggressive site work plan,” and a schedule needed to meet the November 2021 and 2022 start-up dates.
The Vogtle expansion includes two Westinghouse AP1000 reactors, each with about 1,100 MW of generation capacity. The new units will join two existing units at the site near Waynesboro, Georgia.
Delays, Cost Overruns
The Georgia Public Service Commission approved the expansion in 2009, and construction licenses were issued in 2012, but the project has been dogged by construction delays and cost overruns. Westinghouse filed bankruptcy in March 2017. An official monitoring the progress of construction as recently as June said the project was “highly unlikely” to meet state-approved deadlines.
The company plans to start cold hydro testing in the September-November 2020 time frame for Unit 3, where Southern said construction is about 90% complete. It said the start of hot functional testing on that unit could begin as early as October of this year, and should begin no later than February 2021. Fuel load for Unit 3 could occur early next year, or sometime next summer at the latest.
Fanning on Thursday said, “From a cost perspective, Georgia Power proportional share of the total project capital cost forecast increased in the second quarter by approximately $150 million to $8.5 billion largely reflecting estimated COVID-19 impacts and other costs and replenishment of contingency, based on our projections for the remainder of the project. As a result of these selected actions, Georgia Power recorded an after tax charge of approximately $110 million during the second quarter.”
Fanning said Southern Co. has “also reevaluated our estimates for costs and time to complete the final phases of construction, which resulted in hours being added to the direct construction projections for both units. Reflecting these additions, today, Unit 3 direct construction remains approximately 90% complete. We still expect construction completion of about 2% per month to be consistent with the aggressive site work plan and completion of approximately 1% per month to be consistent with the November benchmark schedule.”
Georgia Power’s share of the total capital cost rose “approximately $150 million to $8.5 billion,” said Fanning. “This represents an increase of a little less than 2%, certainly not all, but largely due to the COVID impact. The second biggest factor was a re-estimate of the amount of effort, and therefore hours required to complete the final phases of construction. Georgia Power allocated its remaining contingency and added new contingency of approximately $115 million, further reducing future cost risk through the completion of Unit 4. Embedded in the project’s cost to complete are estimated COVID-19 related costs of between $70 million and $115 million for Georgia Power.”
Georgia Power has a 45.7% ownership share of the project. Other project owners include Oglethorpe Power (30%), MEAG Power (22.7%), and Dalton Utilities (1.6%). Southern Nuclear is the licensee and operator for the ownership group.