Southern, Scana Seen Facing $8.5 Billion Threat on Toshiba WoesBy
A Westinghouse court case could affect nuclear plant contracts
Toshiba said to be seeking Westinghouse restructuring
Scana Corp. and Southern Co. could end up dealing with billions of dollars in additional cost overruns for U.S. nuclear power plants they’ve contracted Toshiba Corp.’s troubled Westinghouse unit to build, according to Morgan Stanley.
Utility owner Scana faces as much as $5.2 billion in higher costs that could drag its shares down 5 percent, Morgan Stanley analysts including Stephen Byrd said in a research note Wednesday. Cost overruns for utility owner Southern could reach $3.3 billion.
The projections come as Toshiba’s trying to recover from an estimated $6.2 billion writedown at its nuclear division. Westinghouse hired an adviser to help restructure its business, people familiar with the situation said earlier this month. Should Westinghouse file for bankruptcy, Scana and Southern could be forced by a court to pick up some of the additional expenses for the already-delayed nuclear projects.
Cost estimates already exceed 20 percent of initial forecasts for both, which will require about three years to complete.
“In the event that Westinghouse is unable to complete the plants and a new contractor is required, we believe Southern and Scana would reassess the costs to determine whether it is still prudent to continue,” Byrd wrote. “We think there is a chance that the companies find the impact to consumers would be too great.”
State regulators don’t want their utilities to abandon multibillion-dollar projects before completion, particularly when they’ve already begun charging ratepayers for them. That puts at risk the $1.60 a share in income that Scana is getting from customers for the projects this year, and the 21 cents a share that Southern was allowed, as well as future recoveries, Byrd said.
“We will continue to hold Westinghouse and Toshiba accountable for their responsibilities under our agreement,” Jacob Hawkins, a Southern spokesman, said in an email. “We are monitoring the situation and prepared for any potential outcome.”
Sarah Cassella, a Westinghouse spokeswoman, declined to comment when reached by phone. Scana, based in Cayce, South Carolina, didn’t immediately respond to a request for comment.
— With assistance by Jim Polson