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South Carolina Company Halts Nuclear Project
The board of directors at Santee Cooper, South Carolina's largest power provider that is based in Moncks Corner, S.C., on July 31 suspended construction work on Units 2 and 3 at the V.C. Summer Nuclear Station in Jenkinsville, S.C. -- a decision the company reports will save its customers nearly $7 billion in additional costs to complete the project. "The decision to suspend construction is based in large part on a comprehensive analysis of detailed schedule and cost data, from both project contractor Westinghouse Electric Co. and subcontractor Fluor Corp., first revealed after Westinghouse, filed for bankruptcy in March," the company's statement said.
So far, Santee Cooper has spent approximately $4.7 billion in construction and interest for its 45 percent share of the new nuclear power project. The new analysis shows the project wouldn't be finished until 2024, four years after the most recent completion date provided by Westinghouse, and would end up costing Santee Cooper customers a total of $11.4 billion. The analysis anticipates Westinghouse will reject the contract in bankruptcy proceedings; it shows the final cost for Santee Cooper to complete the project would be $8.0 billion for construction and approximately $3.4 billion for interest, which would mean the delays have boosted the projected interest costs 143 percent over the original plan.
"Generation diversity remains an important strategy for Santee Cooper, but the costs of these units are simply too much for our customers to bear," said Leighton Lord, chairman of the board. "Even considering these project challenges, Santee Cooper is proud of our role in this initial effort to restart a 30-years-dormant industry. Nuclear power needs to remain part of the U.S. energy mix."
Santee Cooper and majority partner South Carolina Electric & Gas Co. gave Westinghouse full notice to proceed with construction in April 2012. The contract provided that Westinghouse would provide substantially complete units in 2016 (Unit 2) and 2019 (Unit 3), and the Santee Cooper board approved a $5.1 billion budget, representing its 45 percent share of the joint project and additional transmission needed for the Santee Cooper electric system. In October 2015, the board approved an amended Westinghouse contract that included an option to fix Santee Cooper's share of the costs at $6.2 billion, and the board approved fixing the price at $6.2 billion in June 2016.
"After Westinghouse's bankruptcy and anticipated rejection of the fixed-price contract, the best-case scenario shows this project would be several years late and 75 percent more than originally planned," said Lonnie Carter, Santee Cooper's president and CEO. "We simply cannot ask our customers to pay for a project that has become uneconomical. And even though suspending construction is the best option for them, we are disappointed that our contractor has failed to meet its obligations and put Santee Cooper and our customers in this situation."
The company said Westinghouse parent Toshiba Corp. has contractually agreed to pay Santee Cooper $976 million in settlement beginning later this year and continuing through 2022, and that Santee Cooper will use the money to avoid new debt and stabilize rates. "Santee Cooper will continue to pursue Westinghouse assets and other revenues and assets, through bankruptcy court and other legal channels, to further offset costs," Carter said.
The statement said the July 31 board action provides for a wind-down and suspension of construction on the two units and directs management to preserve and protect the site and related components and equipment. "During the wind-down, Santee Cooper will also continue investigating federal support and additional partners to see if we can make the project economical again," Carter said.
Toshiba announced July 28 that it has reached agreements that cap its liability for four nuclear units that were under construction when Westinghouse declared bankruptcy; the other two units are in Georgia.
Santee Cooper has a one-third ownership of V.C. Summer Unit 1, with SCE&G the majority partner.