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US Bankrolls Southern Co.'s Vogtle With $3.7B Loan Guarantee

Zacks Equity Research
Investors need to pay close attention to Denbury Resources (DNR) stock based on the movements in the options market lately.

Bringing in some pleasant news for Southern Company SO, the U.S. federal government approved $3.7 billion in loan guarantees to support the Vogtle Project. The move emphasizes the government’s faith in the future of nuclear energy in the nation. Markedly, the Vogtle plant in Georgia is the only nuclear project that is currently under construction in the United States. The Vogtle plant will make the United States nuclear competitive, helping the nation catch up with the likes of Russia and China. The U.S. Secretary of Energy believes that such nuclear energy projects are important in promoting economic growth via creation of thousands of jobs, and strengthening the country’s energy and national security.

Georgia Power, a subsidiary of Southern Company, is the chief owner of the project with a 45.7% interest. The other co-owners include Oglethorpe Power, MEAG Power and Dalton Utilities. Notably, the Trump administration has guaranteed a loan of $1.67 billion to Georgia Power for the project. Oglethorpe Power Corporation and three subsidiaries of Municipal Electric Authority of Georgia will also receive loan guarantees of $1.6 billion and $415 million, respectively. The additional support will extend the $8.3-billion government aid already issued for the project and bring the government’s total loan guarantees to $12 billion.

The loan guarantees are likely to provide substantial support and encouragement in the completion of the construction of nuclear reactors. The Vogtle nuclear reactors have been grappling with cost overruns and scheduling delays since the commencement of construction. Bankruptcy filing by Westinghouse — a major construction contractor of the two nuclear reactors of the plant — further aggravated costs and caused more delays. Since then, the future of the Vogtle project has been in a limbo. The project is already running four years behind schedule, with a price tag of around $27 billion, almost double of what had been originally estimated. Last September, the clouds of uncertainty looming over the controversial Vogtle Plant finally gave way to sunshine. After prolonged delays and days of negotiation, all the four owners of the project voted to proceed with the construction of the project, which marked a huge step toward strengthening America’s nuclear energy security.

Zacks Rank & Other Key Picks

Southern Company currently carries a Zacks Rank #2 (Buy). Other stocks within the same industry worth a watch include Korea Electric Power Corporation KEP, Otter Tail Corporation OTTR and Alliant Energy Corporation LNT. While Korea Electric and Otter Tail sport a Zacks Rank #1 (Strong Buy), Alliant Energy carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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