• Bechtel, Fluor, are reported to be preparing bids to manage the stranded Vogtle nuclear reactor project.
• Scana is also seeking a new EPC for the V C Summer project.
• The combined cost overruns are estimated to be $13 billion and the delays for both projects are in the range of three years from the original completion dates.
• The expected cost at completion of both projects is now estimated to be about $30 billion. More than 10,000 workers are employed at these sites.

In a widely cited report, the Bloomberg wire service describes efforts by two of the nation’s largest EPC firms to prepare bids to potentially take over the construction of the two partially complete Westinghouse 1150 MW AP1000 nuclear reactors at Southern’s Vogtle site in Georgia. Bechtel and Fluor are working on estimates of the cost, and the time, it will take to complete the two reactors.

The bids will be high risk efforts for both firms as the Vogtle project is already significantly over budget and delayed by several years to consternation of Southern Nuclear.  Westinghouse, which was managing the project, and its main supplier, has declared bankruptcy and is expected to be sold for a fraction of its original value later this year by Toshiba, its parent firm, which is also embroiled in deep financial troubles.

Neither Toshiba nor Westinghouse have been able to present an audited set of financial reports that will give creditors and customers a clear idea where things stand. Westinghouse has told the news media it is facing over $6 billion in losses due to cost overruns at the Vogtle and Scana sites.

Profiles of EPC Bidders

Bechtel, which is a closely held engineering, procurement, and construction (EPC) firm, is reported by Bloomberg to plan to have its bid ready by August.

Separately, Fluor, which is publically traded, is already managing the Vogtle project on behalf of Westinghouse, is also preparing its own estimate. Fluor is already working at the Voglte site as the EPC having been hired by Westinghouse for this role.

Both firms are giants in their fields. Engineering News Record (ENR) ranked Bechtel as the Top US Contractor in 2017 and the Top US Contractor Working Abroad in their annual Top 400 US Contractors list.  The trade magazine similarly ranks Fluor as being among the global top ranked firms for EPC work.

Fluor is also a major investor in NuScale which is developing a small modular reactor design (SMR) that has been submitted to the NRC for design review. Bechtel at one time was partnered with B&W for development of an SMR, but that agreement ended without booking a customer.

Timing of Bid Proposals and CEO Decisions

The August timeframe for submitting the bids to cover work at Vogtle is not particularly welcome news for Southern CEO Tom Fanning who said at a shareholders’ meeting last week that the current interim agreement with Westinghouse expires on June 3rd. An extension is likely while the two EPC firms prepare their proposals. Fanning indicated that he wants to see them before making a recommendation to his board whether to continue the project or scrap it.

The fate of the Vogtle project in Georgia is tied to that of Scana’s V C Summer project in South Carolina. Southern’s agreement in principle to take over the Vogtle project from Westinghouse hinges on whether Scana, the utility that is leading the Summer project, decides to complete the two AP1000 reactors there.

In addition to the two U.S. EPC firms, Scana told Bloomberg that it may also consider a bid from Areva. Scana has said it will decide by June 26th whether to continue the project which is well before any bid would be received from any potential EPC firm.

Westinghouse has said that it wants to help both utilities complete their reactors. To do this any arrangement with a new EPC would have to continue to use the firm for design and engineering, as well as procurement of some components, while the new EPC firm would handle the actual construction work and procurement of non-nuclear components including turbines, switchgear, and other equipment.

Regardless of which EPC firm gets the work, assuming both utilities decide it is in their interests to finish the projects, the state public utility commissions in both states have to approve the plans. Ratepayers, already riled by the huge cost overruns, are likely to closely follow these reviews.

One of the issues the regulators will have to assess is whether Toshiba;, the parent firm of Westinghouse, will fulfill its commitment to settle with both utilities for several billions for each of the projects. The problem is that promising and paying up are two different things.

On May 15 Toshiba inked an agreement with Southern for $3.68 billion to be paid over several years. According to news media reports, Toshiba has also promised to pay Scana $1.7 billion to finish the two reactors there. Both payment commitments are contingent on both utilities agreeing to finish all four reactors.

Scana Seeks Federal Tax Credits

A decision by Scana and its partner investor Santee Cooper to complete the two reactors at the V C Summer site may hinge on whether the utilities can convince Congress to grant the companies more than $2.2 billion in federal tax credits. A similar level of support would also likely be included in any legislation for the Vogtle project.

An effort to include the tax credit in the omnibus funding legislation that passed Congress and was signed by the president on May 5th did not include the tax credits. Chances are now diminished that a free standing bill, sponsored by South Carolina Senator Tim Scott and Rep. Tom Rice, will gain traction.

Their chances might improve if they can get votes from other states that may see new reactors built. Examples include;

• Florida which may yet see plans for two new AP1000s at Turkey Point,
• Virginia which may see a new reactor built at North Ana, and
• Michigan which may see a new reactor built at Fermi.
• A long shot might be Tennessee which is home to the effort by a real estate developer to complete one or both of the TVA’s partially complete Bellefonte units.
• Another long shot is that North Carolina might come onboard in relation to Duke’s plans for two AP1000 reactors to be built at the Lee site in South Carolina. The plant’s service area covers parts of North Carolina.

One possibility, which doesn’t produce nearly the same economic benefit of $2 billion, would be to get federal tax credits for buying major components for the reactors from American firms.

All of these projects are far in the future, and some might never break ground. In effect the majority of the tax credits might never be used.

What this means for the legislation is that it will be seen as a bailout for the four reactors that are under construction. With no policy commitment by Congress to promote nuclear energy as a path to decarbonization, and a president who is hostile to the Paris Climate Change Agreement, the chances of passing the federal tax relief are problematic at best.

In any case the timing of action by Congress is also much further in the future than the decision time line for the CEOs are both Vogtle and Scana to make up their minds whether to keep going to complete the reactors or scrap them. If they kill the nuclear projects the utilities will likely build gas plants to meet the demand for electricity that would have been covered by the reactors.

The nearest window of opportunity to try again fore for the nuclear energy tax credits on future revenues will be tax reform legislation expected to be introduced this Fall, but which isn’t likely to pass in this session.

North Carolina Presses Duke on Lee

(Nuclear Street) The Westinghouse Electric Company bankruptcy filing has provoked concern over a “construction work in progress” (CWIP) in North Carolina, namely the Lee Nuclear Station that has been proposed by Duke Energy.

The North Carolina Utilities Commission (NCUC) has given Duke 60 days to respond to a boatload of questions on the project for which Duke has already spent an estimated $531 million, according to a filing with state regulators in South Carolina.

Of that $531 million, Duke Energy Carolinas (DEC) estimates it has spent 70 percent or more than $370 million on the project in North Carolina, while spending 30 percent in South Carolina. As of 2011, Duke was authorized by NCUC to spend $120 million in North Carolina.

The Charlotte Business Journal reports that the regulator now wants to know why the company has exceeded that limit by $250 million and how it plans to recoup that money,

The utility commission also wants an estimate on what delays might result from the Toshiba’s financial situation and what new costs might be involved. Toshiba’s problems have rattled the global nuclear industry and degraded trust in promises for all future new nuclear builds.

The last Duke cost estimate for the project made public was $11 billion, which it estimated in 2008. That has likely gone up. With interest, the Charlotte Business Journal estimates that the cost of the Lee Nuclear Station is currently at $14 billion.

Westinghouse CEO Predicts Firm Will Emerge from Chap 11 Bankruptcy

(NucNet): Westinghouse Electric Company is “very stable” and will emerge from Chapter 11 bankruptcy “quickly, better, stronger and more competitive”, interim president and chief executive officer José Gutiérrez told the Nuclear Energy Assembly in Arizona on 24 May 2017.

The firm received court approval for an $800 million loan from a private equity firm for its business units that are not directly involved in the Vogtle and V C Summer projects.

Gutiérrez added that the problems that led to the Chapter 11 filing have nothing to do with the AP1000 technology and that the four AP1000 reactors being built in China are proceeding well.

Construction of the four AP1000 reactors being built in the U.S. have experienced catastrophic cost overruns and have been haunted by recurring schedule delays which forced Westinghouse into its Chapter 11 filing.

Many of the problems have to do with the way Westinghouse managed its suppliers including the acquisition of CB&I. That deal is now subject to claims and counterclaims about how excessive costs are to be valued as part of that transaction. More than $2 billion is at stake.

Reuters reported May 15th that Westinghouse said last year CB&I owed it $2 billion. CB&I, on the other hand, estimated it was owed $428 million and in July sued Westinghouse, which is majority owned by Toshiba Corp of Japan (6502.T). CB&I argued Westinghouse was improperly lowering the purchase price by citing liabilities that were disclosed when the deal was agreed

Gutiérrez said the company is working with its customers – Southern Nuclear and SCANA Corporation – to devise a solution to enable completion of the reactors.

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