Santee Cooper and SCE&G will accept nearly $2.2 billion offered by the Toshiba Corp. to defray costs associated with an over-budget and behind-schedule nuclear construction project the companies are working on northwest of Columbia.
The decision was announced at a meeting Thursday of the Santee Cooper board, which voted unanimously to accept the money in installments through 2022. Investor-owned SCE&G’s board earlier this week agreed to the offer from Toshiba, Santee Cooper said. The companies’ joint nuclear construction project has been in jeopardy since chief contractor Westinghouse – a subsidiary of Toshiba – filed for bankruptcy in March.
SCE&G and Santee Cooper could use the money to complete the $14 billion project when Westinghouse exits the construction effort – but whether the project will be finished is far from certain. Escalating costs and the reliability of Toshiba’s financial guarantee are key concerns.
SCE&G and Santee Cooper are assessing whether they will continue the twin reactor project. The companies said the Toshiba payments don’t lock them into building the twin reactors. Santee Cooper said the money could be used to avoid future rate increases at the state-owned utility.
A statement released Thursday by the power companies said they expect the project to cost more than expected and that the $2.168 billion to be provided by Toshiba might not be enough. The effort to build two nuclear reactors at the companies’ V.C. Summer power plant will “materially exceed’’ prior estimates by Westinghouse, as well as “the anticipated guaranty settlement payments from Toshiba,’’ the statement said.
SCE&G and Santee Cooper would split the monetary guarantee from Toshiba, with senior partner SCE&G getting 55 percent or $1.19 billion. Santee Cooper would get 45 percent, or $976 million, Santee Cooper officials said. Toshiba’s offer, if finalized, would cap its liabilities for the nuclear project.
Despite Toshiba’s guarantee, questions continued to surface about whether the company could make good on the money.
The Japanese corporation has its own financial troubles because of the Westinghouse bankruptcy. It is trying to sell off some of its other businesses to raise cash. Some reports have said Toshiba could also file for bankruptcy. Toshiba’s board met earlier this week and approved the settlement.
Lonnie Carter, Santee Cooper’s chief executive, said at Thursday’s board meeting that Toshiba’s finances and ability to pay the full amount are worrisome. He said Santee Cooper would have preferred all of the money up front. As it stands, the money will be paid in installments beginning in October and ending in September 2022.
“Quite frankly, Toshiba’s financial condition is a concern, no matter whether we accept this settlement today or not,’’ Carter said before the board vote. “We have to live with that as part of where we do find ourselves today.’’
If Toshiba can’t provide the money because of a possible bankruptcy in Japan, Santee Cooper might be “forced to litigate .... in a foreign jurisdiction,’’ he said.
Both S.C. power companies said the project also likely won’t be completed by 2021, the current deadline for SCE&G to gain production tax credits for completing the reactors. Congress is working on a bill to extend the deadline that would bring more than $2 billion in production tax credits for the project.
Santee Cooper and SCE&G face an Aug. 10 deadline to finish studies on whether they should complete the two reactors at the V.C. Summer power station in Fairfield County. The $14 billion project is $2.5 billion to $3.5 billion over budget and several years behind schedule. Construction work is about one-third complete and is continuing until a final decision is made.
But the news release issued jointly by the utilities after Santee Cooper’s meeting raised questions about their commitment to building two reactors. The release said delays in the project and the need for power would weigh on the ultimate decision. Both companies will have excess capacity after the projects are built.
“We are committed to making a financially responsible decision for our customers and other stakeholders,’’ said Kevin Marsh, chief executive of SCE&G’s parent corporation, SCANA. “We are close to completing our analysis of the various options to determine the most prudent path forward.’’
SCE&G’s and Santee Cooper’s joint decision to build the two nuclear reactors has been under fire amid rising rates for customers, many of whom are upset at what they say are ever-escalating power bills. Public interest groups, including Friends of the Earth and the Sierra Club, are fighting to shut down the work at V.C. Summer.
They argue that abandoning the project, even after the companies have spent $9 billion, is a better option because rates will continue to escalate and customers will pay more to build the two nuclear plants. Customers of SCE&G and Santee Cooper have collectively been hit with 14 rate hikes, so far, to pay for the project near Jenkinsville. Critics say Santee Cooper and SCE&G don’t need the energy.
The Electric Cooperatives of South Carolina, whose members get much of their power from Santee Cooper, applauded the settlement Thursday. But nuclear project critic Tom Clements said the settlement provides too little money and too much uncertainty to think it will be enough to build the two reactors.
“This is not a ‘go out and party’ kind of decision,’’ said Clements, who attended the meeting in Moncks Corner.
The more than $2 billion Santee Cooper and SCE&G were guaranteed is less money than Toshiba guaranteed utilities in Georgia, where Westinghouse also was building two nuclear reactors. Those familiar with both agreements said that’s because of the way the contract with Westinghouse was structured. Toshiba last month agreed to pay utilities in Georgia $3.68 billion beginning this fall to offset Westinghouse’s bankruptcy and its inability to complete work at the Vogtle project near the Savannah River.
In South Carolina, Westinghouse had guaranteed to pay 25 percent of the amount the utilities had spent on the project if the company found it could not complete the work, according to the state Office of Regulatory Staff, which is charged with advocating for consumers. Toshiba agreed to back the guaranteed amount, said Dukes Scott, director of the Office of Regulatory Staff. That worked out to about $1.7 billion, SCE&G officials said last spring.