This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stock Under $10 that he thinks could potentially double or triple in the next 6 to 12-months. See what he's trading today with a 14-day FREE pass.

Southern Comfort

Critics argue defaults are more likely in renewable energy technologies, not nuclear power. They are wrong.

Nuclear defaults happened in the past. Under the Rural Electrification Administration (REA), the federal government guaranteed $948 million to Wabash Valley Power Association, a non-profit cooperative utility. Wabash Valley used the proceeds to invest in a 17% share of the Marble Hill Nuclear Power Facility. Public Service Company of Indiana PSI, which is now part of Duke Energy (DUK), owned the other 83% share. Marble Hill's construction costs escalated. Cost increases and schedule delays forced PSI to abandon construction in 1984. Unfortunately, PSI's decision wiped out shareholders and forced Wabash Valley into default. Like Solyndra, Wabash Valley faced years of federal investigations and legal threats.

The difference is Southern's balance sheet is strong. If it needs to, Southern can raise additional cash and manage modest cost overruns. And Vogtle will likely face cost overruns and schedule delays.

While potential cost overruns and scheduled delays could be painful, it is unlikely it will be devastating to Southern's shareholders or rate payers. After a few years of operations, Plant Vogtle will prove to be an incredibly valuable asset. Not just for Georgia, but also for the nation.

Southern's aggressiveness is bold. When completed, the company's four-unit nuclear facility will become the nation's largest and most modern nuclear power facility. At approximately 4,660 megawatts, Plant Vogtle will provide Georgia with continuous power at very low production costs. In the long term, this plant will be cheap.

Investors have to give Southern some credit. Where others hesitated, Southern aggressively pursued innovative technologies. Today, Southern is the only utility willing to take a chance with clean coal technologies. This year, Southern's integrated gasification combined cycle (IGCC) project should enter commercial service. This is truly high technology; it can make coal cleaner than natural gas.

At the same time, Southern is building a first-of-a-kind IGCC. The company is taking a leadership position with a first-of-a-kind nuclear power plant. Vogtle 3 and 4 are the nation's first next-generation nuclear power plants.

Only Scana  (SCG) is willing to build a similar plant. NextEra Energy (NEE), Duke, Dominion Resources  (D) and their state regulators decided to wait it out; they are deferring their nuclear construction to another decade.

Notwithstanding the good news, Southern currently has an unhealthy payout ratio. Nevertheless, on the earnings call, management said they remain committed to growing the dividend. "While dividend increases are subject to Board approval, the implied payout ratios associated with a $0.07 per year increase are reasonable within the context of our strong cash flow, business model and constructive regulatory jurisdictions."

This week, as the rest of the nation realizes they may have over committed to natural gas, Southern's future looks brighter. Its portfolio of generating plants will likely become the envy of the nation. Southern has no peers.

At the time of publication, Glenn Williams had no positions in any of the stocks mentioned.


Glenn Williams has more than 30 years of experience in power and fuels, including design, engineering, construction, startup and operations of large-scale power projects. He has had direct involvement with coal plants, natural gas facilities, and approximately half of the nation's nuclear power facilities and designs energy strategies for regulated and unregulated energy organizations. He received a bachelor's degree in electrical engineering from Northeastern University and a master's degree in technology management from the University of Maryland.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
DOW 17,067.33 -105.35 -0.61%
S&P 500 1,985.72 -8.57 -0.43%
NASDAQ 4,515.0860 -12.6030 -0.28%

Our Tweets

Brokerage Partners

Top Rated Stocks Top Rated Funds Top Rated ETFs