In a major blow to Westinghouse Electric Co. and the American nuclear industry as a whole, two utilities in South Carolina have abandoned building the company’s AP1000 nuclear power plants despite sinking billions of dollars over a decade into the projects.
Those two plants, along with a pair being built in Georgia, were supposed to revive the U.S. nuclear industry after a 30-year hiatus in new construction. With all the fits and starts of the first-of-a-kind plants — in fact, their delays and cost overruns forced Cranberry-based Westinghouse into bankruptcy in late March — they were seen by utilities and nuclear players as the future of the industry.
The decision by the Scana Corp. to call it quits on the VC Summer units — after ratepayers of the South Carolina utilities had already paid for more than $1 billion for work on the plants — will have a chilling effect on regulators, consumers and potential nuclear customers in the U.S. and abroad, said Paul Murphy, a Washington, D.C.-based managing director in Gowling WLG’s Energy Group.
“If you can’t build plants in your own country, that’s not a great story for nuclear in that country and it’s not a great story for the ability to export,” he said.
Westinghouse, which handed a five-year business plan to its bankruptcy lenders last week, said it is still evaluating the impact of Scana’s decision.
That five-year business plan, according to a Westinghouse statement released Monday, calls for layoffs amounting to a 7 percent reduction in headcount globally. The company employs about 12,000. In April, the company said it had about 4,500 in the Pittsburgh region.
The decision to abandon the AP1000 projects in South Carolina has not been factored into that yet, Westinghouse said. Layoffs will begin as early as this month, said Westinghouse spokeswoman Sarah Cassella.
More than a month ago, Westinghouse was able to negotiate with Southern Co., which owns the Georgia project, to shift responsibility for constructing two plants onto the local utility there.
But Westinghouse hadn’t been able to reach the same agreement with its clients in South Carolina. Monday’s announcement illuminates the delay.
In a statement, Scana Corp., the parent of SCG&E, one of the utilities that commissioned the Westinghouse plants at VC Summer, said it began doing a deep dive into the project after Westinghouse filed for bankruptcy.
The company recently concluded that it would be “prohibitively expensive” to finish building the nuclear plants. This is in spite of the fact that it negotiated with Westinghouse’s parent company, Toshiba, for a $2.2 billion guarantee for the project just a few days ago.
Scana also said it didn’t think the reactors could be online by 2021, as Westinghouse has promised.
The development will put more pressure on the Georgia project, said Mr. Murphy of Gowling WLG. He suspected that regulators there might start asking themselves what was known in South Carolina that might not have been known in Georgia.
“Are we confident enough to say their decision is based on things we’re not suffering from?” Mr. Murphy imagined them saying.
Westinghouse’s president and CEO José Emeterio Gutierrez said the company is “extremely disappointed” in the decision.
“The South Carolina economy is sure to feel the negative impact of losing over 5,000 high-paying, long-term jobs, as well as not having available the reliable, clean, safe and affordable energy these units would provide,” he said. “Also, at a time when other nuclear plants are being retired, the U.S. energy sector is sure to feel the stunting impact of walking away from these two nuclear units.”
Westinghouse's AP1000 design — based on two decades of research and development, according to the company — is a pressurized water reactor that relies on gravity and other passive safety mechanisms in the event of a problem. The first four of these power plants, each worth several billion dollars, are being built in China and are also behind schedule and over budget.
The Chinese projects, however, have escaped some of the pitfalls of their American counterparts because Westinghouse is not managing the construction process there.
Instead, Westinghouse in China serves in the role that the Cranberry company would prefer to have in the U.S. projects and everywhere going forward — as a technology partner.
It is in that capacity that Westinghouse is trying to finalize deals to build AP1000 plants in India, for example, although these efforts have been stalled and marred by the company's bankruptcy.
Anya Litvak: email@example.com or 412-263-1455.