The Southern Company (SO 2.24%) is generally a boring utility known for paying a reliable dividend. In fact, for 75 consecutive years the dividend has either been increased or held steady. That's an impressive record, but the company's record on its Vogtle nuclear power project isn't nearly as good. This quarter, though, management is confident that it really has the project back on track. Here's the newest plan to get these nuclear plants up and running.
A good idea
Southern is, at this point, the only electric utility building nuclear power plants in the U.S. It is making this investment for a very good reason, given that nuclear power doesn't emit carbon. It is therefore a clean energy source. Environmental advocates would argue that the inherent riskiness of nuclear power, given a few notable meltdowns or near meltdowns, makes it an undesirable source of electricity. There's a case to be made there.
Image source: Getty Images.
However, it is also important to put the nuclear disasters that have happened into broader context. For example, the Fukushima plant suffered from an earthquake and tsunami, a level of devastation that wasn't planned for. Three Mile Island didn't cascade into a major catastrophe. And Chernobyl involved material human errors. There have been many lessons learned from earlier problems that have been incorporated into more modern nuclear power plant designs. Today's plants, including the model being built by Southern Company that is already being used in China, are expected to be safer than older ones. And, other than these major incidents, nuclear power has proven to be pretty safe and reliable.
For Southern, the two plants it is constructing are expected to provide years of reliable baseload power. Collectively known as the Vogtle project, it will allow the company to provide cleaner electricity and balance the inherent volatility of renewable clean power sources like solar and wind. So, from a long-term perspective, it sounds like a pretty good idea for the giant utility.
Missing the mark
The problem is that the Vogtle project has been going poorly for years. That includes the original contractor filing for bankruptcy, a move that led another utility that was using the same contractor to simply call off its nuclear power plans. Southern didn't do that, opting to take over management of the project itself. By that point, however, Vogtle was already way over budget and late. Southern was starting to get things moving again when the pandemic hit, with the health scare leading to labor issues that caused more delays and cost overruns. Ongoing labor and supply chain issues likely aren't helping any.
It has not been pretty, but in the first quarter Southern put out a schedule that it says it can meet. The key end dates include putting the Vogtle 3 in service between the fourth quarter of 2022 and the first quarter of 2023. Vogtle 4 is then slated to go live between the third quarter of 2023 and the fourth quarter of 2023.
The next big step for Vogtle 3 is for fuel to be loaded sometime around October, which was pushed out from August. Vogtle 4, meanwhile, will start key testing between January and February 2023, pushed out from October 2022. Fuel load is scheduled for July or August of 2023, out from April. The company has nearly $1.7 billion in capital spending ahead of it on this project, rounding out a total spend of $10.4 billion.
That, however, is just Southern's share. The total project cost started out at around $14 billion but has now ballooned, according to some estimates, to more than $30 billion. Partners in the project, including the government, are pitching in the rest. Clearly, Southern has been having a rough time getting this plant done.
Almost there
At this point, Southern really has no choice but to keep pushing forward with the Vogtle project. And the completion date, while moved out yet again, is slowly getting closer, with both plants under construction nearing important milestones. This is just one of many things Southern is working on, but it is an important one for investors to monitor given the high-profile nature of the construction effort and the long-term clean energy it will provide... when Vogtle 3 and 4 are finally complete.
