"We expect the further delay of Vogtle Units 3 & 4 to be a negative for CBI shares today and potentially remain
We expect the further delay of Vogtle Units 3 & 4 to be a negative for CBI shares today and potentially remain an overhang over the near term, given that it may take more than a year to resolve this dispute. That said, the risk to CBI’s cash flow may be lower than the headline cost overrun number suggests for the following reasons: 1) CB&I’s contract with Westinghouse states that certain excess costs can be recovered by Westinghouse, so depending on the cause of delay, CB&I may avoid the cost overrun; 2) In the worst case scenario, the costs would likely be divided between the contractors, so assuming a 50/50 split, CB&I would be responsible for only $370M," continued the analyst.
"In terms of liquidity risk from this potential charge, the likelihood is low, in our view. Not only can CB&I generate ~$2.5B of cash from its existing backlog over the next 4 years (assumes no new bookings after 3Q14) but it also has $1.3B of its revolver currently available. We expect the next nuclear-related catalyst for CBI to occur on February 27th when the Georgia Public Service Commission releases its semi-annual construction monitoring report," he added.