Georgia Power - the largest subsidiary of
) - has received approval from the Georgia Public Service
Commission (PSC) to invest in the construction of Plant Vogtle
units 3 and 4. The approval is for the period starting July 1, 2011
through December 31, 2011.
EXELON CORP (EXC): Free Stock Analysis Report
SOUTHN COMPANY (SO): Free Stock Analysis Report
To read this article on Zacks.com click here.
Vogtle Electric Generating Plant (or Plant Vogtle) - located near
Waynesboro in Burke County, Georgia - has been registering safety
and technological developments. The manufacturing costs of both the
units of this nuclear power facility are being monitored by the
The facility has already received important advancements on turbine
islands, cooling towers and nuclear islands, while further upgrades
will continue in the nuclear island, turbine building and module
assemblies in the upcoming months. Significant components will
likely reach the location by the year-end or by early next year.
Unit 3 is expected to commence operation in 2016 and Unit 4 is
scheduled for 2017.
The plant is jointly owned by Georgia Power, Oglethorpe Power
Corporation, Municipal Electric Authority of Georgia and Dalton
Utilities with 45.7%, 30%, 22.7% and 1.6% stakes, respectively.
Another affiliate of Southern Company, Southern Nuclear, is
regulating the construction and will operate the two units for
Georgia Power and its associate partners.
Headquartered in Atlanta, Georgia, Southern Company is the second
largest generator of electricity in the nation behind
), serving both regulated and competitive markets across the
Southeastern U.S. We consider the Southeast to be one of the better
regions to operate an electric utility, due to the
higher-than-average natural population growth, the strong and
diverse regional economy, constructive regulation and comparatively
tight power markets. These characteristics provide a solid basis
for Southern Company's regulated business, which is expected to
comprise roughly 90% of its consolidated earnings over the next few
However, we remain skeptical regarding Southern Company's $14
billion investment for the construction of two new reactors at the
company's existing nuclear site in Vogtle, Georgia. With a fair
chance of cost overruns and likely modifications to fully address
the safety risks following the meltdown at Japan's Fukushima plant
last year after a devastating earthquake and tsunami, the project
cost could easily come to around $20 billion. This will
substantially increase Southern Company's leverage and deteriorate
its credit metrics.
Additionally, the increasing capital intensity of its operations
may result in reduced returns going forward. Hence, we see the
stock performing in line with the broader market and maintain our
long-term Neutral recommendation. The company also retains a Zacks
#3 Rank (short-term Hold rating).