Southern Company's Vogtle Project Gets $3.7 B Loan Guarantee

The Southern Company (NYSE:SO) recently received additional federal loan guarantee of $3.7 billion for Vogtle Project, emphasizing the government’s faith in the future of nuclear energy in the nation. Georgia Power, subsidiary of Southern Company, is the chief owner of the project with a 45.7% interest. The other co-owners include Oglethorpe Power, MEAG Power and Dalton Utilities.

The Department of Energy (DOE) guaranteed $1.67 billion to Georgia Power for the project. Oglethorpe Power Corporation and three subsidiaries of Municipal Electric Authority of Georgia will also receive loan guarantees of $1.6 billion and $415 million, respectively. These additional loan guarantees extend the $8.3 million loan guarantees already issued for the project. The DOE had already granted loan guarantees of $6.5 billion to Georgia Power and Oglethorpe Power in 2014 and an additional support of $1.8 billion in 2015.

The Vogtle nuclear reactors have been grappling with cost overruns and scheduling delays since the commencement of the construction of the project. Further, bankruptcy of Westinghouse, the major construction contractor of the two nuclear reactors of the plant, aggravated costs and led to additional delays. Since then a cloud of uncertainty has been hovering over the beleaguered plant. The project is already running three years behind schedule and is over budget by more than $10 billion which can go up to $20 billion by 2022.

In June, Westinghouse’s parent company Toshiba Corporation agreed to provide a financial assistance of $3.68 billion for the development of two nuclear reactors. Moreover, the loan guarantees by the DOE is also likely to provide substantial support and encouragement in the completion of the construction of the nuclear reactors. The U.S. Secretary of Energy believes that such nuclear energy projects are important in promoting economic growth and strengthening the country’s energy and national security.

The DOE believes that the plant will make the United States nuclear competitive, helping the nation catch up with the likes of Russia and China. Many nuclear proponents have also supported the company’s commitment toward nuclear power with zero emissions, finding it more reliable than solar and wind energy. With the decision to continue with the project, Vogtle plant in Georgia will be the only project which is under construction in the United States.

The Georgia Public Service Commission is soon to complete the review process and take a final call regarding the expansion of the Vogtle project in February.

Zacks Rank and Stocks to Consider

Southern Company is one of the largest and best-managed electric utility holding companies in the United States. The firm dominates the power business across the southeastern region. Southern Company has lost 0.10% of its value year to date against 7.3% growth of its Original post

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Written By: Zacks Investment Research