Chicago Bridge & Iron Costs Are 'Nuclear,' Macquarie Warns

In a report published Wednesday, Macquarie analyst Sameer Rathod maintained an Underperform rating on

, with a price target of $30, citing escalating nuclear costs. "A public service commission (PSC) monitor recently noted that the completion of milestone activities related to Vogtle has continued to slip in 2015…The PSC also noted that only 23.7% of construction has been completed as of April 2015," analyst Sameer Rathod wrote. In case the project slips an additional 6 months, into 2021,

(NYSE:

) could lose production tax credits of an estimated US$522 million, which would take the cost overrun to about US$2.5 billion. Chicago Bridge CFO Michael Taff mentioned that cost overruns would be borne by their partner, Westinghouse. In the report Macquarie noted, "We think this scenario is unlikely and think CBI will be held partially responsible given execution in fabrication and construction." While there could be some delays related to reactor design amendments, the PSC indicated that the project schedule was also being impacted by "required repair work on...legacy modules from Lake Charles." Rathod pointed out that this "further confirms that CBI will be held partially responsible." "We remain Underperform on CBI as we think news on nuclear flow will likely continue to be negative, adding to uncertainty. We think that further project delays are likely," the report added.