Southern Company’s Options in the Westinghouse Case
Moody’s downgrades utilities
The impact has started to loom for utilities that are exposed to Westinghouse’s bankruptcy. Rating agency Moody’s has changed Southern Company’s (SO) subsidiary Georgia Power’s outlook from “stable” to “negative” due to increased regulatory and credit risk resulting from Toshiba’s weak financial condition. Toshiba is the parent of Westinghouse Electric.
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Westinghouse is a contractor of two nuclear reactors of Southern Company in Georgia and two of SCANA Corporation (SCG) in South Carolina. Notably, Moody’s also downgraded Mississippi Power, another major subsidiary of SO, in March, with a “negative” outlook, although it reiterated SO’s stable outlook.
Moody’s has also downgraded South Carolina Electric and Gas, a subsidiary of SCANA Corporation.
What’s ahead for SO?
According to Utility Dive, Westinghouse may continue to work for existing power plant construction contracts. However, that would result in cost increases that would be shouldered by Toshiba’s guarantees that back up Westinghouse. This points to a possible scenario of Westinghouse rejecting the existing projects.
In that case, Southern Company may take up the project itself. However, regulators should play a crucial role in this scenario, which could significantly increase the burden on ratepayers.
On the other hand, abandoning the project completely would hamper the rate base expansion plans of Southern Company. For more information on this topic, please read After Kemper, Westinghouse’s Bankruptcy Bites Southern Company.
Southern Company began its Vogtle nuclear plant in 2009 with a cost estimate of $14 billion and an expected in-service date range of 2016–2017. The cost has crossed beyond $21 billion now, with no online date in sight.