Southern Co. will need $3.7 billion in guarantees that Toshiba has posted for its bankrupt Westinghouse Electric unit in order to finish the Vogtle nuclear project in Georgia, the company's CEO told the Wall Street Journal.
Even with that amount, CEO Thomas Fanning told investors on an earnings call the guarantee may not be sufficient to complete the nuclear project, which is years behind schedule and billions over budget.
Fanning told investors Southern is “seeking to add structure to Toshiba’s payment obligations,” and that the utility wants to make a decision on whether to finish the plant "in the next month or two."
Fanning made a trip to Japan for a face-to-face meeting with Toshiba CEO Satoshi Tsunakawa soon after Westinghouse declared bankruptcy in March. The point was to confirm Toshiba's "moral commitment" to finishing Vogtle, he said.
Since then, Toshiba’s posture with respect to Westinghouse seems to have deteriorated, with the company announcing the spin-off of its business units to insulate them from the fallout of the nuclear developer's bankruptcy.
During the earnings call, an analyst asked if the cost to complete the plant would exceed Toshiba’s guarantee.
Fanning said he “wouldn’t view that as a conclusion at this point” indicated Southern would continue to work toward an agreement that would allow construction to move forward. He also said that there are about $920 million in letters of credit that could be used to help address the cost issues and that Southern has given notice to the banks to begin the process of drawing down the funds from those LCs.
Fanning also indicated he expects Westinghouse to reject its construction contract for Vogtle, but said that there are other options to continuing the work, including the possibility of Southern assuming construction responsibility.
Last week, Southern and Westinghouse agreed to an extension on an interim construction agreement that gives them until May 12 to finalize a deal to complete Vogtle.
The extension was shorter than the one SCANA reached with Westinghouse on the Summer nuclear project it is building in South Carolina. SCANA has until June 26 to finalize a deal, but the exclusion of a nuclear tax credit extension in the latest federal spending bill could jeopardize its completion.
Until an agreement can be reached, Fanning said he is keeping Toshiba and Westinghouse on a “short leash.”
“Keeping Westinghouse in this kind of limbo role under bankruptcy is not good for the project for any period of time,” he said.