Another Vogtle Reactor Deadline Passes: Taxpayer Advocates Warn Government Keeps Pushing Bad Deal That Wall Street Won't Touch

  Another Vogtle Reactor Deadline Passes: Taxpayer Advocates Warn Government
             Keeps Pushing Bad Deal That Wall Street Won't Touch

PR Newswire

WASHINGTON, July 2, 2013

WASHINGTON, July 2, 2013 /PRNewswire-USNewswire/ -- Think Washington has
learned its lesson after Solyndra? Think again. The nonpartisan budget
watchdog group Taxpayers for Common Sense (TCS) pointed out today that another
deadline has passed for the U.S. government, Southern Company, and other
entities involved in the controversial Vogtle nuclear reactor project to reach
agreement on loan guarantee terms.

Even as the end of June deadline for reaching agreement on loan guarantee
terms comes and goes, Washington continues to woo Southern and its utility
partners – while nearly every major Wall Street rating firm has downgraded
Southern and the related entities due to increased risks and financial
uncertainties associated with the Vogtle project, which could cost taxpayers
15 times that of the Solyndra deal.

Ryan Alexander, president, Taxpayers for Common Sense, said: "This whole
thing has the stink of another Solyndra-like goose egg for American taxpayers.
Wall Street is sending every possible signal that investors would be
ill-advised to hop on the Vogtle bandwagon and yet Washington is taking
exactly the opposite tack: bending over backwards to find a way to put
taxpayers on the hook, no matter how bad the terms. We say: Enough is enough.
There has been ample time to work out a deal here. Now that we know Wall
Street wants no part of it, we think it's time for prudent people in D.C. to
follow suit and put the interests of taxpayers first."

Just how negative is Wall Street about the Vogtle reactor project? When it
downgraded Southern Company on June 21, the ratings agency Zacks wrote: "We
also remain skeptical regarding Southern Company's $14 billion investment for
the construction of two new reactors at the company's existing nuclear site
inVogtle, Georgia. With a fair chance of cost overruns and likely
modifications - to fully address the safety risks exposed by the meltdown at
Japan's Fukushima plant ... the project cost could easily end up around $20
billion. This will substantially increase Southern Company's leverage and
deteriorate its credit metrics."

The adverse Wall Street ratings are just one of the issues addressed in TCS'
fact sheet issued today

As TCS notes, in February 2010, the Department of Energy (DOE) conditionally
offered Southern Company and its partners a total of $8.33 billion in
taxpayer-backed loan guarantees to construct two 1,100 MW Westinghouse AP1000
reactors (reactors 3&4) at Southern Co.'s Plant Vogtle near Waynesboro,
Georgia. Southern Co. experienced massive cost overruns while constructing the
first two reactors at the site in the 1980s. Original estimates for Vogtle
reactors 1&2 were under $1 billion each, but final costs skyrocketed to nearly
$9 billion.

Currently, reactors 3&4 are estimated to cost more than $14 billion and come
online in 2017 and 2018, respectively. However, construction delays and
pending lawsuits have already pushed the project's commercial operating date
back a year and could cause significant increases in project costs. In a
February 2013 report to the Georgia Public Service Commission, Georgia Power
(subsidiary of Southern Co.) requested approval for additional project costs
totaling $737 million, potentially raising the initial $14 billion estimate to
$14.7 billion.

Further, Westinghouse and the Shaw Group—the two contractors hired to
construct Southern's two new reactors—filed suit against the Southern Co. and
its partners seeking $900 million over disputed costs resulting from project
design changes. As of June 2013, litigation is pending. If the project's
utility partners lose the lawsuit, project costs could rise to $15.6 billion.

Here is what Wall Street is saying about the key players in the troubled
Vogtle reactor project:

  oGoldman Sachs and Zacks Investment Research have recently rated Southern
    Company as a "sell." The Southern Company (parent company of Georgia
    Power) reported net income of $2.35 billion in 2012. The energy
    conglomerate currently has around $1.3 billion in outstanding debt and a
    debt-to-asset ratio of 36.8 percent. In first quarter of 2012, Southern
    Company earned $0.42 per share. In the first quarter of 2013 this dropped
    by 79 percent to $0.09 per share. Goldman Sachs cited "accelerating
    capital spending on Vogtle nuclear project and ongoing litigation with the
    plant's contractors" as well as the Kemper coal gasification plant and
    upcoming GA Power rate case. Zacks pointed to weak share earnings,
    increased expenses, and high risks associated with the construction of
    reactors 3&4 at Plant Vogtle. With the likelihood of additional delays and
    cost overruns, Zacks states "the project cost could easily end up around
    $20 billion."
  oStandard and Poor's downgraded the Outlook on Southern Company and Georgia
    Power's credit ratings from 'Stable' to 'Negative.' Georgia Power has 45.7
    percent ownership of the proposed Vogtle expansion project, and its share
    of project costs is nearly $6.4 billion. Georgia Power is currently paying
    for financing costs associated with Vogtle reactors 3&4 in part by
    charging its customers in advance with a tariff referred to as a Nuclear
    Construction Cost Recovery Rider with a Construction Work in Progress
    (CWIP) balance that now totals $2.3 billion.
  oFitch Ratings recently downgraded the outlook on all of Oglethorpe Power
    Corporation's bonds from 'Stable' to 'Negative.' Oglethorpe's 2012
    financial filings note that the rising costs of the Vogtle project are a
    risk factor for the company. Oglethorpe's share of the project (30
    percent) has increased from $4.2 billion to $4.5 billion while the Vogtle
    3&4 reactors' planned commercial operation dates have been pushed back a
    year to the fourth quarter of 2017 and 2018, respectively. 
  oMoody's has downgraded the outlook on Municipal Electric Authority of
    Georgia bonds from 'Stable' to 'Negative.' MEAG Power (loan guarantee
    applicant), a not-for-profit public energy consortium based in Fulton
    County, Georgia, was created by the Georgia General Assembly in 1975 to
    provide power to small cities and towns. MEAG estimates its share of
    reactors 3&4 construction costs (22.7 percent) will come to $4.2 billion.
    To finance that amount, MEAG has issued three series of bonds since 2009:
    Project M bonds, Project J bonds, and Project P bonds. MEAG Power had
    $6.63 billion of outstanding debt at the end of 2012.

Taxpayers for Common Sense is a 501(c)(3) nonpartisan budget watchdog serving
as an independent voice for American taxpayers. The mission of TCS is to
achieve a government that spends taxpayer dollars responsibly and operates
within its means. The organization works with individuals, policymakers, and
the media to increase transparency, expose and eliminate wasteful and corrupt
subsidies, earmarks, and corporate welfare, and hold decision makers

SOURCE Taxpayers for Common Sense, Washington, D.C.
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