8. Electric plant, construction and related agreements:

a. Electric plant

We, along with Georgia Power, have entered into agreements providing for the purchase and subsequent joint operation of certain electric generating plants. Each co-owner is responsible for providing their own financing. The plant investments disclosed in the table below represent our undivided interest in each plant. A summary of our plant investments and related accumulated depreciation as of December 31, 2016 and 2015 is as follows:


	2016					2015
		(dollars in thousands)
Plant		Investment		Accumulated Depreciation			Investment		Accumulated Depreciation

In-service(1)
Owned property
Vogtle Units No. 1 & No. 2 (Nuclear – 30% ownership)	$	2,885,559	$	(1,712,642	)	$	2,869,142	$	(1,674,431	)
Vogtle Units No. 3 & No. 4 (Nuclear – 30% ownership)		36,163		(1,567	)		22,557		(891	)
Hatch Units No. 1 & No. 2 (Nuclear – 30% ownership)		809,971		(407,400	)		767,019		(391,822	)
Wansley Units No. 1 & No. 2 (Fossil – 30% ownership)		577,781		(190,974	)		499,180		(163,266	)
Scherer Unit No. 1 (Fossil – 60% ownership)		1,083,772		(368,948	)		1,086,435		(332,493	)
Doyle (Combustion Turbine – 100% leasehold)(2)		135,849		(102,642	)		124,051		(90,590	)
Rocky Mountain Units No. 1, No. 2 & No. 3 (Hydro – 75% ownership)		607,742		(234,765	)		600,640		(222,888	)
Hartwell (Combustion Turbine – 100% ownership)		227,878		(104,342	)		226,737		(103,111	)
Hawk Road (Combustion Turbine – 100% ownership)		250,595		(69,984	)		243,517		(70,832	)
Talbot (Combustion Turbine – 100% ownership)		290,790		(119,874	)		290,463		(111,617	)
Chattahoochee (Combined cycle – 100% ownership)		313,693		(123,946	)		310,788		(114,914	)
Smith (Combined cycle – 100% ownership)		614,453		(176,701	)		601,903		(166,324	)
Wansley (Combustion Turbine – 30% ownership)		3,582		(3,569	)		3,582		(3,513	)
Transmission plant		92,085		(53,251	)		90,195		(50,786	)
Other		99,644		(61,356	)		116,396		(73,442	)
Property under capital lease:
Scherer Unit No. 2 (Fossil – 60% leasehold)		757,282		(383,378	)		743,543		(354,918	)

Total in-service	$	8,786,839	$	(4,115,339	)	$	8,596,148	$	(3,925,838	)

Construction work in progress
Vogtle Units No. 3 & No. 4	$	3,069,476				$	2,724,543
Environmental and other generation improvements		158,181					143,723
Other		557					403

Total construction work in progress	$	3,228,214				$	2,868,669


(1)	Amounts include plant acquisition adjustments at December 31, 2016 and 2015 of $197,000,000.
(2)	On August 20, 2015, we acquired Doyle which we previously operated under a capital lease.

Our proportionate share of direct expenses of joint operation of the above plants is included in the corresponding operating expense captions (e.g., fuel, production) on the accompanying Statement of Revenues and Expenses.

b. Construction

We, Georgia Power, the Municipal Electric Authority of Georgia, and the City of Dalton, Georgia, acting by and through its Board of Water, Light and Sinking Fund Commissioners, doing business as Dalton Utilities (collectively, the Co-owners) are parties to an Ownership Participation Agreement that, along with other agreements, governs our participation in two additional nuclear units at Plant Vogtle, Units No. 3 and No. 4. The Co-owners appointed Georgia Power to act as agent under this agreement. Our binding ownership interest and proportionate share of the cost to construct these units is 30%. Pursuant to this agreement, Georgia Power has designated Southern Nuclear Operating Company as its agent for licensing, engineering, procurement, contract management, construction and pre-operation services.

In 2008, Georgia Power, acting for itself and as agent for the Co-owners, entered into an Engineering, Procurement and Construction Agreement (the EPC Agreement) with Westinghouse Electric Company LLC and Stone & Webster, Inc. (collectively, the Contractor). Stone & Webster was subsequently acquired by Westinghouse and changed its name to WECTEC Global Project Services Inc. Pursuant to the EPC Agreement, the Contractor agreed to design, engineer, procure, construct and test two 1,100 megawatt nuclear units using the Westinghouse AP1000 technology and related facilities at Plant Vogtle.

Under the EPC Agreement, the Co-owners agreed to pay a purchase price that is subject to certain price escalations and adjustments, including fixed escalation amounts and certain index-based adjustments, as well as adjustments for change orders and performance bonuses. The EPC Agreement also provides for liquidated damages upon the Contractor's failure to fulfill the schedule and performance guarantees, subject to a cap of 10% of the contract price, or approximately $920,000,000 to $930,000,000. In addition, the EPC Agreement provides for limited cost sharing by the Co-owners for increases to Contractor costs under certain conditions. The maximum amount of additional capital costs under this provision attributable to us is $75,000,000. Each Co-owner is severally, not jointly, liable to the Contractor for its proportionate share, based on ownership interest, of all amounts owed under the EPC Agreement. In the event of certain credit rating downgrades of any Co-owner, such Co-owner will be required to provide a letter of credit or other credit enhancement.

Under the terms of the EPC Agreement, the Contractor does not have the right to terminate the EPC Agreement for convenience. The Contractor may terminate the EPC Agreement under certain circumstances, including certain suspension or delays of work by the Co-owners, action by a governmental authority to stop work permanently, certain breaches of the EPC Agreement by the Co-owners, Co-owner insolvency, and certain other events. In the event of an abandonment of work by the Contractor, the maximum liability of the Contractor under the EPC Agreement is increased significantly but remains subject to limitations. The EPC Agreement permits Georgia Power, acting for itself and as agent for the Co-owners, to terminate the EPC Agreement at any time for their convenience, provided that the Co-owners will be required to pay certain termination costs.

Certain obligations of Westinghouse under the EPC Agreement, including, but not limited to, liquidated damages and damages related to abandoning the Vogtle project, have been guaranteed by Toshiba Corporation, Westinghouse's parent company. In January 2016, as a result of credit rating downgrades of Toshiba, Westinghouse provided the Co-owners with $920,000,000 of letters of credit pursuant to the terms of the EPC Agreement. These letters of credit remain in place in accordance with the terms of the EPC Agreement.

On February 14, 2017, Toshiba announced preliminary earnings results for the period ended December 31, 2016, which included a goodwill impairment charge of over $6,000,000,000 at Westinghouse primarily attributable to the increased cost estimates to complete its nuclear projects in the United States, including Vogtle Units No. 3 and No. 4. As a result of the charge, Toshiba warned that it will likely be in a negative equity position which has created significant uncertainty regarding potential actions Toshiba may take to address this situation. At that time, Toshiba reaffirmed its commitment to its nuclear projects in the United States with implementation of management changes and increased oversight. However, since that initial announcement, Westinghouse has engaged legal and financial bankruptcy advisors and is soliciting debtor-in-possession financing packages, significantly increasing the likelihood that Westinghouse will file bankruptcy in the near-term. We are also aware that some subcontractors have asserted that the Contractor has not made payments for work performed at the Vogtle project. Georgia Power, on behalf of the Co-owners, and we are analyzing potential contingency planning scenarios and have retained legal and financial advisors in the event the Contractor fails to remedy any payment deficiencies or Westinghouse files for bankruptcy protection. A failure by Westinghouse or Toshiba to perform its obligations, including as a result of a declaration of bankruptcy by either or both of Westinghouse and Toshiba, under the EPC Agreement or the related Toshiba parent guarantee, respectively, could have a material impact on the cost and schedule for Vogtle Units No. 3 and No. 4.

In February 2017, the Contractor also provided Georgia Power, as agent for the Co-owners, with a preliminary schedule for revised forecasted in-service dates of December 2019 for Unit No. 3 and September 2020 for Unit No. 4, delays of six months and three months from the prior forecasted in-service dates of June 2019 and June 2020, respectively. The Contractor, Georgia Power and other Co-owners are continuing to review the schedule supporting these revised dates which must ultimately be reconciled with an integrated project schedule. Based on this continued schedule verification, at this time, we believe that the revised in-service dates of December 2019 and September 2020 do not appear to be achievable. To the extent that the Contractor is unable to meet the current revised forecasted in-service dates, such delay could have a material impact on the cost and schedule for Vogtle Units No. 3 and No. 4. We believe the Contractor is responsible for any related costs for not achieving the schedule and performance guarantees in the EPC Agreement. The EPC Agreement provides that the Contractor will begin to incur delay liquidated damages if the nuclear fuel loading dates for Unit No. 3 and No. 4 go beyond December 31, 2018 and December 31, 2019, respectively.

Our project budget for Vogtle Units No. 3 and No. 4, which includes capital costs and allowance for funds used during construction, is currently $5,000,000,000. As of December 31, 2016, our total investment in the additional Vogtle units was $3,269,000,000. Although many factors could increase our project budget, we do not anticipate that the announced six and three month delays to the forecasted in-service dates for Units No. 3 and No. 4, respectively, will change our current project budget. In the event the Contractor is unable to meet the revised forecasted in-service dates, we anticipate that each month of additional delay in the near-term will cost us approximately $20,000,000, including financing and owner's costs, net of liquidated damages. Further, the failure of Westinghouse or Toshiba to perform its obligations under the EPC Agreement or the related Toshiba parent guarantee, respectively, could have a material impact on the cost and schedule of Vogtle Units No. 3 and No. 4 and could significantly impact our project budget.

Substantial risks remain that continued challenges with the Contractor's construction performance, including labor productivity, fabrication, delivery, assembly and installation of plant systems, structures and components, or other issues could further impact the project schedule and cost. In addition, there have been technical and procedural challenges to the construction and licensing of Vogtle Units No. 3 and No. 4 at the federal and state levels, and additional challenges may arise as construction proceeds. Processes are in place that are designed to assure compliance with the requirements specified in the Westinghouse AP1000 Design Control Document and the combined construction and operating licenses, including inspections by Southern Nuclear and the Nuclear Regulatory Commission that occur throughout construction. As a result of such compliance processes, certain license amendment requests have been filed and approved or are pending before the Nuclear Regulatory Commission. Further, various design and other licensing-based compliance matters, including the timely resolution of inspections, tests, analyses and acceptance criteria by the Nuclear Regulatory Commission may arise as construction proceeds, which may result in additional license amendments or require other resolution. If any license amendment requests or other licensing-based compliance issues are not resolved in a timely manner, there may be further delays in the project schedule that could result in increased costs to the Co-owners, the Contractor, or both.

Future claims by the Contractor or Georgia Power, on behalf of the Co-owners, could arise throughout construction. These claims may be resolved through formal and informal dispute resolution procedures under the EPC Agreement and may be resolved through litigation after the completion of nuclear fuel load for both units. The failure of Westinghouse or Toshiba to fulfill its obligations under the EPC Agreement or the related Toshiba parent guarantee, respectively, as a result of a bankruptcy filing would also be expected to lead to litigation and we would expect Georgia Power, on behalf of the Co-Owners, to aggressively pursue and seek to enforce all potential Co-owner rights and remedies.

Despite the uncertainty surrounding the EPC Agreement and the financial health of Westinghouse and Toshiba, at this time we remain committed to continuing to work on the Vogtle project. We will continue to monitor and evaluate developments related to the Vogtle project and will endeavor to undertake a course of action that we believe will advance the long-term interests of our members. Georgia Power has stated that it is prepared to take appropriate actions on behalf of the Co-owners should Westinghouse or Toshiba fail to perform its obligations under the EPC Agreement and the related Toshiba parent guarantee, respectively.

The ultimate outcome of these matters cannot be determined at this time.