Tom Fanning is the only energy executive in America willing to bet billions on nuclear power.
The chief executive officer of utility giant Southern Co. is renowned for his boundless optimism, which he generously spreads around. He's chairman of the Federal Reserve Bank of Atlanta, co-leader of one industry group and a former chairman of another. He's a frequent visitor to Washington, where he has met with Vice President Mike Pence, Scott Pruitt of the Environmental Protection Agency and old friend Energy Secretary Rick Perry. Fanning is often a guest of TV business news, where he has spoken glowingly about "clean coal" and nuclear.
There's just one problem. His company isn't doing that well.
Southern's Vogtle nuclear plant in Georgia, the first U.S. nuclear project to be licensed in three decades, went through a near-death experience as total estimated costs doubled to more than $25 billion. The plan survives with the help of $12 billion in federal loan guarantees. Southern also pulled the plug this year on its ambitious "clean coal" project in Kemper County, Miss., taking a $2.8 billion pretax charge that contributed to its biggest quarterly loss in a quarter century.
Southern's total return has increased 86 percent since Fanning took over in December 2010. But the S&P 500 Utilities Index return rose 137 percent and the S&P 500 return jumped 156 percent in the same period.
Fanning and his utility are approaching a crossroads, the same fork in the road that energy producers and distributors face around the world. As the planet warms and thousands of jobs hang in the balance, it's critical they direct investments to energy sources that best serve the present and future.
He picked nuclear.
The 60-year-old CEO leads a company buffeted by some of the biggest changes in the industry since Thomas Edison. A glut of natural gas flowing from shale formations has caused electricity prices to plummet, forcing coal and nuclear plants to shut. Demand for power has yet to recover since the recession, thanks to gains in efficiency and customers' increasing use of rooftop solar panels and other decentralizing technologies.
Under his watch, Fanning said Southern has reduced reliance on coal from 60 percent to about 30 percent, increased its use of renewable and hydropower sources to 9 percent and expanded its access to natural gas by buying distributor AGL Resources. Southern also acquired a company, PowerSecure International, which builds backup grids and installs and manages solar projects.
The CEO's admirers say designs for the "clean coal" and nuclear plants were set in motion before Fanning took over and he has done his best to shepherd them. In an interview, Fanning agreed.
"I came in after those decisions, and have been accountable for executing on that," he said. "I would argue mega-projects like Vogtle and Kemper are pretty hard to do."
Nuclear and coal-fired power plants would get a boost under a plan from President Donald Trump's administration. The Federal Energy Regulatory Commission would allow electricity customers to be charged more in order to bail out struggling power generators, which would be rewarded for keeping fuel on site. Proponents say it would make the energy grid more resilient. Critics say it would be expensive and solve a nonexistent problem.
Fanning has harnessed his energy and his connections to become one of the most high-profile executives in the energy business. But his optimism has sometimes annoyed investors.
Last year, Fanning told them that Southern was in "as good a shape as we've been in some years" and that its $7.5 billion "clean coal" project, backed by the Energy Department and thought to pave the way toward a cleaner-burning future for the coal industry, was moving along "beautifully."
Instead, the Kemper startup effort was plagued by delays and construction snafus and Southern abandoned it. Southern still faces lawsuits from various parties that claim improper disclosure about the project.
Southern, which owns 45.7 percent of the Vogtle project, is building two new reactors about 175 miles east of Atlanta, where two nuclear units already operate. More than 6,000 workers are involved in constructing the facility, which will have 800 permanent employees. The new units are expected to be finished by November 2022. They'll produce enough power for 500,000 homes and businesses. The loan guarantees were set in motion under the administration of George W. Bush and first granted to Southern while Barack Obama was president.
Critics, including consumer and environmental groups, argue that the Vogtle plant no longer makes sense because there are cheaper and cleaner options available.
"Even as every other utility realized the extreme risks to their shareholders and customers and correctly decided to stop the financial bleeding, Southern stubbornly presses forward," Stephen Smith, executive director for the Southern Alliance for Clean Energy, said in a statement.
In a filing earlier this month, the Georgia Public Service Commission said the Vogtle plant is "no longer economic" and the economic benefit would be "negative $1.6 billion."
The Vogtle nuclear reactors still have a chance to succeed. After builder Westinghouse Electric Co., a unit of Toshiba Corp., went bankrupt earlier this year, partly because of cost overruns at Vogtle, Southern agreed to take over construction. Fanning has said that the project is vital to the country's national security. The company is awaiting approval from Georgia regulators to complete it. A decision is expected Dec. 21.
Business on 12/13/2017