Oglethorpe plays smart
Southern Company (SO) stock has continued to show weakness recently amid increasing uncertainty regarding the fate of Plant Vogtle. Three of the Vogtle’s four owners gave the go-ahead for the project while Oglethorpe Power, which owns roughly 30% of the project, submitted a conditional vote on September 24. Oglethorpe wants to put a cap on the project budget. A vote against the project from Oglethorpe would force the project to be canceled. Southern Company’s biggest subsidiary, Georgia Power, owns 45.7% of the project, while Municipal Electric Authority of Georgia owns 23%, and Dalton Utilities owns 1.6%.
According to an article from Bloomberg on September 25, all the co-owners of Plant Vogtle are trying to agree on the provisions that would limit the potential impact of further cost increases of the project.
Southern Company stock has fallen 11% year-to-date, while the Utilities Select Sector SPDR (XLU) is trading close to its early-2018 levels. SO has fallen 13% since it disclosed $1.1 billion of cost increases for Plant Vogtle early last month.
Southern Company’s under-construction nuclear power plant Vogtle has faced quite a few cost overruns and delays in the last few years. The total project cost has now reached beyond $27.0 billion, more than double the original estimate a decade ago. Due to these cost increases, Oglethorpe’s share of the budget increased from $4.2 billion to $7.25 billion. The in-service dates from Plant Vogtle’s units three and four remain unchanged at November 2021 and 2022, respectively.
Moreover, with its increasing project cost, Plant Vogtle is progressing at a time when nuclear generation is becoming highly uneconomical in the United States. This trend is due to relatively cost-effective options such as natural gas and renewables.