At Southern Company’s (SO) shareholder meeting, I enumerated some examples in the U.S., Japan, and Germany of nuclear gone bad, and pointed out Japan, Germany, and even Bulgaria had already or were getting out of nuclear, while Southern Company and Georgia continued to bet the farm on nuclear, and I asked what was SO’s exit strategy for when that bad bet goes bad? SO CEO Thomas A. Fanning said they had learned everything there was to learn from Fukushima, and besides Plant Vogtle is 100 miles inland where there are no earthquakes. He didn’t mention the same description applies to Chernobyl. He did say SO planned to make the U.S. nuclear industry the best in the world.
You kept using big bets and then bet the farm. Very interesting terminology.
Um, the title of SO’s corporate biography that SO was giving out in the lobby in paper, video, and audiobook formats is Big Bets: Decisions and Leaders That Shaped Southern Company. And ‘nuclear’s “bet-the-farm” risk’ is, as I mentioned, bond-rater Moody’s phrase.
He said the new Plant Vogtle units were planned for $14 billion and 10 years to build, and
…it is a big investment.
He said a company to do such a thing needed scale, financial integrity, and existing credibility of operations.
Scale seems to me a problem, since SO seems deadset on building mainframes in a networked-tablet world.
SO’s nuclear financial track record is that four nuclear plants were originally planend for Plant Vogtle at a cost of $660 million and only two were built at a cost of $8.87 billion. The new units at Plant Vogtle are already overbudget by almost a billion dollars. The Georgia Power bonds that SO CEO Fanning mentioned: aren’t they guaranteed by the $8.33 billion federal loan guarantee?
Regarding operations credibility, a year ago Vogtle Unit 1 shut down 2 days after the NRC gave Vogtle a clean bill of health. But the SO CEO says it’s all better now.
Here’s the video, followed by links to sources for the points I made:
Exit strategy for when this big nuclear bet goes bad? –John S. Quarterman
Shareholder Meeting, Southern Company (SO),
Callaway Gardens, Pine Mountain, Georgia, 23 May 2012.
Video by John S. Quarterman for Lowndes Area Knowledge Exchange (LAKE).
Here are the main points I was reading from, with links:
Update 11 July 2012: fixed some links.
- My name is John Quarterman. I am a pine tree farmer in Lowndes County, Georgia, a couple hours’ drive from Plant Hatch, and about twice that far from Plant Vogtle.
- I am proxy representing Lynn R. Chong of New Hampshire, home of Seabrook, the last nuclear plant permitted in this country before the new units at Plant Vogtle.
- I want to start by congratulating CEO Thomas A. Fanning on his 62% compensation raise in 2011. Georgia Power customers also got a raise, a rate hike to help pay for the new nuclear units at Plant Vogtle, due to that nuclear investment act of a few years ago.
- I’m a fan of big bets, but bond rater Moody’s calls investment in new nuclear energy a “bet-the-farm risk”.
- Since Seabrook and Three Mile Island, Wall Street has consistently refused to make significant investment in new nuclear facilities, and the expansion of Plant Vogtle is now only possible through an $8.33 billion dollar federal government loan guarantee to socialize Southern Company’s financial risks.
- Japan bet the farm on nuclear, and got Fukushima, one of the world’s worst nuclear disasters. Japan has since shut down all 50 of its reactors, in just under 18 months, forcing power company TEPCO to take an $8.7 billion loss and a $12.5 billion bailout from the Japanese government.
- Since Fukushima Germany has already closed eight nuclear plants and is closing more, already forcing Germany’s biggest power company, E.ON, to lay off up to 11,000 staff, to take its first quarterly loss in a decade, and to cut its shareholder dividend.
- Even Bulgaria cancelled its Belene nuclear plant this March, and has started installing solar power instead.
- Yet Georgia and the Southern Company continue betting the farm on Plant Vogtle. That bad business bet risks bankrupting Southern Company like Seabrook bankrupted Public Service of New Hampshire, and like Fukushima is bankrupting E.ON and TEPCO; TEPCO which is surviving only on government bailouts.
- This bet-the-farm risk has Georgia Power customers paying extra to keep Georgia still farther behind in wind and solar energy. Behind places like California, North Carolina, and even New Jersey. Solar and wind for which there are private investors like Google because the costs are known and the installation times are quick, unlike nuclear.
- I’m also pleased to hear that Southern Company is doing private research. SO sounds like just the company to research smart grids and balancing power. There’s a study out of North Carolina; I’m sure you’re familiar with it; it may help with that.
- With Plant Vogtle schedule slips and cost over-runs already occurring and 32 pending permit amendments which will cause further delays and cost rises, what is Southern Company’s exit strategy for when this big bet goes bad?