1. Southern is concerned that the intellectual property required to complete the construction of the AP1000 has been included as collateral for the debtor in possession loan Westinghouse has sought will make it difficult or impossible to complete construction.

    At first glance, I doubt that the creditor would impede access. It’s doubtful that any more AP1000s will ever be built (outside of China). It’s a certainty if Vogtle/Summer are abandoned. By denying access, the creditor would make the collateral worthless, except for perhaps, the Chinese.

    However, I suspect that it is in Toshiba’s interest to see Vogtle and/or Summer abandoned. Toshiba wants nothing further to do with Westinghouse and would be off the hook for providing financial guarantees for cost overruns should the projects be abandoned. The proceeds from the sale of Toshiba’s profitable chip business would not be thrown down this black hole and could even be used to recapitalize Toshiba. Perhaps Toshiba would not even have to sell the chip business at all. The value of it’s distressed stock would rise, perhaps substantially.

    Toshiba/Westinghouse and Vogtle/Summer are circling each other, waiting for the other to capitulate. Each must show “good faith” in order to present the best case in court should either blink first. Toshiba/Westinghouse have time on their side as Vogtle/Summer are paying the bills. Further, Vogtle/Summer have a coalition of partners, any of which could get cold feet. Finally, Vogtle/Summer have nervous regulators (and irate rate payers) looking on.

    I heard an estimate of $2 Billion dollars for a natural gas plant to provide replacement generation for one of these projects. That is far less than the current cost of completion even without cost overruns. I don’t know if such a facility could be located so close to existing operating nuclear sites. If they can, they can take advantage of the switchyard and cooling facilities already constructed. Yes, natural gas prices will rise, however this is passed on to the customers.

    The most realistic, optimistic scenario is that one unit will be completed with the other abandoned for spare parts to sustain a 60 year operational lifetime in the absence of a future supply chain.

    Ultimately, the decision to continue will be a political decision based on how much support the regulators are able to offer.

    I could see Babcock and Wilcox buying the fuel/services of Westinghouse. While there would be anti-trust concerns, it would satisfy national security concerns.

    1. @FermiAged

      You wrote:

      At first glance, I doubt that the creditor would impede access. It’s doubtful that any more AP1000s will ever be built (outside of China). It’s a certainty if Vogtle/Summer are abandoned. By denying access, the creditor would make the collateral worthless, except for perhaps, the Chinese.

      You’re more straightforward than I am. What makes you think that a random “private equity” creditor has any desire to ensure that AP1000-related IP has any value?

      1. Taking the issue at face value is why I said “at first glance”. They might sense some value in extorting Vogtle/Summer over access to the IP. Or resale value to the Chinese, though I understand the Chinese have acquired enough AP1000 design knowledge to enable them to design an uprated version. It is curious that Westinghouse offered the AP1000 IP as collateral for a DIP loan limited to the fuel/services part of the business. It will be interesting to see if this is what kills the projects.

        Look at the background of several principals of the Apollo Management Group. Many are veterans of the financial games of the 1980’s. Nothing they do would suprise me unless it demonstrates honor.

        Another curious aspect is the apparent lack of interest in pursuing the “inappropriate pressure” that Westinghouse imposed on it’s financial people to make the company appear more valuable than it was when purchased by Toshiba. Supposedly, this is why Toshiba’s auditors won’t sign off on it’s financial statements and are being replaced. Any prospective buyer would want this potential criminal issue addressed before closing the deal. Perhaps an issue to be held in reserve should Vogtle/Summer decide to continue?

        I know many that have moved themselves and their families from across the country to work on these plants. Their cancellation will be a severe blow, releasing many into the nuclear workforce as plants are closing. For some, it will be an unplanned early retirement.

        1. I should also add that anything that delays a sale of Westinghouse also reduces the potential funds for Toshiba’s guarantees to Vogtle/Summer making them more likely to abandon the project.

    2. I’m a bit confused – how can whoever owns the IP in the future, impede completion of the project. Vogtle/Summer already have acquired licenses to the IP by virtue of entering into a contract with Toshiba/Wtghs to buy a nuclear plant, have they not? Wouldn’t courts rule that those licenses guarantee them the right to complete the project?

  2. I have a silly question.

    Wouldn’t Construction (and Commissioning/Startup) also include IP of the items in the plant?

    What does and does not constitute IP that Westinghouse (or any other plant designer) keep?

    I thought it all got turned over to the client? As part of ‘purchasing’ the plant.

    1. I haven’t seen IP defined but I have heard it described as the drawings, bill of materials, technical manuals, procedures, calculations and software etc. used to design and operate the plant.

      In the past, the utility would get the drawings, technical manuals and procedures. They would usually not get access to the calculations or the software used to design the plant, determine set points etc. unless they paid (dearly) for it. This would keep the utility locked into the NSSS vendor for future reloads, services and support. Believe me, Westinghouse has not retained it’s utility customers due to its great customer service.

      Westinghouse was contractually obligated by SCANA to put the IP in escrow, so SCANA is not at risk in the way Southern is. The risk to SCANA is that the design is not yet complete and until startup and initial operation, there is no telling what design changes might be required. Another risk is keeping the design expertise be in Westinghouse while it is under distress and or sold. Looking at glassdoor.com, it looks like Westinghouse is not a fun place to work.

  3. Given the enormous benefit to Big Oil in creating this mess in at Summer and Vogtle, it is difficult to imagine that they are not involved at the executive level at Toshiba in Japan, given Japan’s status as one of the most corrupt countries in the OECD with massive levels of influence of the Yakuza crime syndicates in Japanese governance. Big Oil is often compared to organized crime.

    The $6B or so in losses on the two projects is small relative similar large civil engineering projects so why was Toshiba not prepared? The Boeing 787 was $20B over budget on its development Olympic games budgets are often over by more than this amount.

    The whole fiasco has the stink of yet another Big Oil black op.

    1. Almost all the errors in this fiasco were unforced. If there was any financial impropriety, it was within Westinghouse and the companies it purchased. I would not blame Toshiba for throwing Westinghouse under the bus.

      Yes, wall street pirates will try to profit on this. But they were brought in only after a cascade of incompetence.

    2. @seth

      If you want to trace the influence of oil and gas money in the AP1000 saga, I suggest you start closer to home. Perhaps Lake Charles, LA would be a good place to find out how well the early stages of the module production phase of the project were staffed and engineered.

  4. I just can’t blame Big Oil and Gas for perfecting the dance that nuclear should’ve learned decades ago. You keep seeing oil and gas pulling themselves clean out of PR disasters that have wiped neighborhoods and lives yet nuclear can’t tout an almost death-free record and win over hearts and minds. Trump likes fighters like gas and oil are, and he’s always seen the nuclear community as wimps in the self-promotion arena, especially with examples as Indian Point and Shoreham in the neighborhood, so no small wonder he’s into fighting fossils. Nuclear’s woes have been self-inflicted wounds from the get go. Oh, Gov. Cuomo has made it clear that upstate nukes will only stay on until “renewables” are in place which he’s pushing with a passion. Of course no nuclear PR pushback. Long the crux of the problem.

    James Greenidge
    Queens NY
    Near the soon extinct totally unadvertized Indian Point.

  5. It sure does seem conspiratorial, that the nuke projects nearly all over the world cannot get completed. Japan seems to have tremendous trouble restarting units that ran fine before Fukushima. France which has 80 percent of it’s country’s electricity produced by nuclear, cannot get it’s Flamanville nuke plant completed which is supposed to be an advancement of the old units. The same type is being constructed in Finland, but seems stalled at 80 – 90 percent completion. It seems as though the French should have the expertise to finish both ot these units. San Onofre shut down due to steam generator problems which supposedly could have been tolerated and / or repaired. Smaller US units seem to be falling like dominoes. The accounting rules seem to encourage their demise.

    I do not think the 4 units being constructed in the US are much more complex than the many units that were constructed in the sixties and seventies which have put many safe reactor hours behind them.

    I guess the truth of what is really happening may be written by a historian some day when time puts a clear lens on the situation.

    1. The South Koreans have had success at home and abroad. They have the advantage of a proven design, domestic supply chain and discipline. Of course, running trade surpluses and having your defense needs subsidized also helps.

      1. Apparently all four of the leading contenders in the Korean presidential elections want to at least restrict, and at worst, curtail, nuclear power. ( This article doesn’t have the policy of one of the candidates, though I read somewhere else that he wants to head towards a 2060 closure date for all nuclear power.)

        1. I am not completely surprised. While nuclear makes great technical, strategic, and economic sense in the ROK, having their cable scandal so close after Fukushima was a public relations disaster. LNG is currently cheap, so it can be offered by politicians. Whether they will actually cancel plants under construction or curtail nuclear marketing is not clear. It would be a shame after KEPCO, ENEC, and others have had relative success with APR-1400.

  6. I never thought that ether of these two plants would ever be put into operation. The first give away was the fact that no plants like this have been built in decades , the next was the fact it had the alleged support of the [LOL] Obama administration , I actually thought it very likely the plants would at some point be converted over to natural gas and that’s a possibility yet to be seen. I never thought so much of the reactors and supporting structures would be completed before this would happen. This is the end of the much heralded nuclear renaissance and I strongly suspect of the LWR. The only way ahead for nuclear power in America [IMO] is if a government program of construction of pebble bed or molten salt reactors is undertaken. This can be done by constructing prototype reactors , expand to a power park operation and feed the power to local power grids. After that we might see it return to private ownership.

    1. Reading last week’s SCANA conference call transcript, there are three factor going forward:

      1. True cost/schedule for completion as determined by a thorough review of Westinghouse internal information. Westinghouse says an extra $1.5 billion.

      2. Whether Toshiba/Westinghouse can fulfill the obligated financial backstop to cost overruns. This figure was calculated to be $1.7 billion.

      3. The ability for either unit to qualify for Production Tax Credits as currently specified (substantial completion by end of 2020) or their extension to a later date.

      4. A factor that was not explicitly stated was the continued partnership with the other utility involved.

      I could see the following scenario:

      The lead unit stands a reasonable chance of qualifying for the PTC. The other unit is initially deferred until the issue of the PTC is resolved. If the PTC is not extended, the second unit is abandoned. It may be needed for spare parts anyway. There is legislative action to extend the PTC but it is still in committee.

      This assumes that a review shows Item 1 exceeds item 2.

      If the junior partner drops out, than only one unit will be built which would be roughly sufficient for projected load for SCANA since they have a 55% interest in both units. The junior partner would have to build a gas plant.

      A major risk is the poor labor productivity. While module and component delivery has been a problem, labor productivity is emerging as the dominant problem. This has been long recognized yet steps to mitigate it have been ineffective. This has a major impact on item 2 which is just barely lower than item 1.

      So there is still a reasonable chance that at least one of the SCANA units will be built. Vogtle may be more at risk since they have multiple partners and seem to have more opposition in the state. I don’t know the impact of having the DOE loan guarantees has.

      Then there are wild cards if my suspicion about Toshiba preferring that the utilities abandon the project is correct. Down the road, if the Chinese units show major problems during startup/operation or if there is an upheaval in the credit markets that hinders financing another decision will have to be made.

      1. @FermiAged

        If SCANA and GA Power are not already talking to each other, I think they need to start really soon. I know a little about the cost associated with being a technological orphan. Even if there are components lying around from three abandoned units, a one (or even two) of a kind plant will experience a lifetime of higher-than-expected operational costs.

        1. They do, but their contracts are different so there is some divergence such as over the IP issue.

          One of the issues to be evaluated is to actually look at the IP and see if it is actually sufficient to complete and operate the plant. Certainly, the ability to support operations has to consider the uncertainty over the final form Westinghouse takes. Are the AP1000 people scattered after the plant is operational? Do SCANA and GA Power competitively scavenge the remnants? Could a joint company be created by SCANA/GA Power for engineering services? What would be required to develop the ability to be independent of Westinghouse?

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