Fitch Ratings said Jan. 3 that it sees no major credit issues with Municipal Electric Authority of Georgia’s (MEAG) participation in the in-construction Vogtle 3 and 4 nuclear units.
Fitch affirmed two sets of MEAG revenue bonds related to a combined-cycle power plant built last decade at ‘A+’. The Rating Outlook is Stable. The bonds are secured by revenues received by MEAG Power attributable to the combined-cycle project, including payments under power sales contracts with each project participant. The bonds are also secured by various funds established by the resolution.
The 37 city- and county-owned electric systems that participate in the combined cycle project also exhibit solid breadth, diversity and creditworthiness, Fitch noted. Participant obligations under the power sales contracts are general obligations of which their full faith and credit are pledged.
MEAG Power’s participation in the construction of the Plant Vogtle nuclear Units 3 and 4 and the projected impact of the related borrowings on the authority’s financial metrics and wholesale cost of power supply have already been factored into the rating.
MEAG Power is a joint action agency created to provide bulk electric power to municipally-owned electric distribution systems located throughout the state of Georgia. The authority effectively supplies the full energy requirements of 49 systems via participation in a series of power supply projects. The participating systems provide electric service to approximately 308,000 retail customers, representing a total population of 614,000.
MEAG Power currently has ownership interests in 2,069 MW of capacity, including the natural-gas-fired combined-cycle project (503 MW). That project entered commercial operation in 2004 and has performed solidly in-line with industry averages for similar units. The majority of the authority’s capacity is co-owned with Georgia Power, Oglethorpe Power and the City of Dalton; however, the combined cycle project is owned exclusively by MEAG Power.
The portfolio of resources available to serve participant requirements during 2012, which also included 341 MW of Southeastern Electric Power Authority (SEPA) hydroelectric capacity and purchased peaking capacity, was “comfortably” above peak demand (1,920 MW), Fitch noted. For the first nine months of 2013, the fuel mix for delivered energy exhibited solid diversity: 48% nuclear, 27% coal, 15% natural gas, 7% hydroelectric and 3% purchased power.
Fitch: construction extended, costs up at Vogtle project
Construction at Vogtle 3 and 4, which will have over 2,200 MW of combined capacity, has accelerated following issuance of the construction and operating license in early 2012. However, challenges have resulted in revisions to the project schedule and cost, Fitch noted. Estimated commercial operation dates for Units 3 and 4 have been revised from April 2016 and 2017 to the fourth quarter of 2017 and 2018, respectively. Completion cost estimates for MEAG Power’s share have increased from $3.5bn to $3.9bn.
“MEAG Power’s pre-funding strategy, whereby approximately 65% of the authority’s capital requirements for the Vogtle expansion have already been funded, mitigates a considerable portion of the project funding risk,” Fitch said. “Additionally, a conditional commitment from the Department of Energy (DOE) Loan Guarantee program brings total funding and commitments above expected needs. Fitch does not believe that the Vogtle expansion project or the recent revision of cost estimates will materially impact, or jeopardize the competitiveness of, MEAG Power’s wholesale power rates, assuming project completion. The new Vogtle Units will account for only a small portion of the authority’s total power supply, particularly given the contracted sale of project capacity to JEA (electric system revenue bonds rated ‘AA’ with a Stable Outlook) and PowerSouth Energy Cooperative (revenue bonds rated ‘A-‘ with a Stable Outlook) through 2037.”
Southern Co. (NYSE: SO) subsidiary Georgia Power is the largest stakeholder at 45.7% of Vogtle Units 3 and 4. Georgia Power’s partners in the nuclear project include Oglethorpe Power, MEAG and the City of Dalton. The new units will incorporate light-water Westinghouse AP1000 design technology