Corporate News Blog - Georgia Power Enters into Agreement with Westinghouse and Toshiba
Research Desk Line-up: Companhia Paranaense de Energia Post Earnings Coverage
LONDON, UK / ACCESSWIRE / June 13, 2017 / Pro-Trader Daily takes a look at the latest corporate events and news making the headlines for The Southern Co. (NYSE: SO). Georgia Power, the largest subsidiary of Southern Co., announced on June 09, 2017, that it has entered into a new agreement with Toshiba, the parent Company of Vogtle contractor, Westinghouse. Georgia Power also affirmed the value of Toshiba's guarantee of $3.68 billion. Westinghouse commenced the construction of two new units at Plant Vogtle in 2009. For immediate access to our complimentary reports, including today's coverage, register for free now at:
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The Vogtle Expansion
The Alvin W. Vogtle Electric Generating Plant near Waynesboro, GA, is the state's second nuclear power plant jointly owned by Georgia Power, Oglethorpe Power Corporation, the Municipal Electric Authority of Georgia, and Dalton Utilities. Georgia Power began planning Plant Vogtle in 1971. While unit 1 commenced operations in 1987, Unit 2 began operating in 1989. At the peak of construction, more than 14,000 people worked to build the two electric generating units at Plant Vogtle, where the 3,100-acre site along the Savannah River is probably the largest construction project ever undertaken in Georgia.
The Rising Energy Demand
This expansion is viewed as a step to satisfy the growing demands of a new baseload capacity. The population of the southeastern United States continues to grow multifold, and according to the US Department of Energy, 40% of the US population exists in the Southeast by 2030. The state of Georgia individually is expected to grow by 4 million people in 2030. In the next 15 years, electrical demand on the Georgia Power System is expected to grow 30%, and hence, the demand for an expansion is dominant in the area.
This operational agreement between Westinghouse and Georgia Power comes with $3.68 billion debt security from Toshiba. The Company is installing its own AP1000 reactor designs, citing cost overruns at Vogtle, the primary factor in its bankruptcy filing on March 29, 2017. Units 3 and 4 are years over budget with the initial speculation that they would come online beginning in 2016. Current operational deadlines are set for 2019 and 2020, respectively.
The expansion is about $3 billion over budget. During the bankruptcy and operations negotiations, Georgia Power stated that it would work to make Westinghouse accountable for financial obligations, including efforts to secure Westinghouse debts from the parent Company, Toshiba.
The Announcement
In addition to affirming the value of $3.68 billion in parent guarantees from Toshiba, the agreement also offers a view of the timing and form of payments for the obligation. The scope of the service agreement with Westinghouse includes engineering, procurement, and licensing support, in addition to access to Westinghouse intellectual property needed for the project. The agreement will take effect post approval of the bankruptcy court and rejection of the current engineering, procurement, and construction contract by Westinghouse.
Georgia Power has taken over the construction operations where the Company announced engineering and licensing support and access to Westinghouse intellectual property required to finish the project. The financial guarantees from Toshiba could enable the Company to either finish the nuclear expansion or convert it into a natural gas position.
The agreement was approved by the Department of Energy and is awaiting approval from the bankruptcy court. The interim agreement has been offered an extension till June 22, 2017, while the first payment from Toshiba Corp. is due in October 2017.
Last Close Stock Review
On Monday, June 12, 2017, the stock closed the trading session at $50.85, marginally up by 0.34% from its previous closing price of $50.68. A total volume of 4.97 million shares have exchanged hands. Southern's stock price advanced 2.17% in the last one month, 2.25% in the past three months, and 7.26% in the previous six months. Furthermore, since the start of the year, shares of the Company have gained 3.37%. The stock is trading at a PE ratio of 18.90 and has a dividend yield of 4.56%. The stock currently has a market cap of $50.88 billion.
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