Moody's downgraded the ratings of JEA Electric Enterprise on Oct. 11, including its senior-lien electric system revenue bonds to A2 from Aa2, due to its exposure to the Vogtle nuclear expansion project's construction.
The Jacksonville, Fla.-owned utility has a 20-year power purchase agreement with the Municipal Electric Authority of Georgia, or MEAG, for 206 MW of the delayed Vogtle project to build two new reactors. MEAG owns a 22.7% share of Vogtle.
On Sept. 26, Vogtle-owners Georgia Power Co., MEAG and Oglethorpe Power Corp. voted to continue building the project. JEA opposed the continuation in light of another $2.3 billion cost increase revealed in August. Prior to that vote, JEA and MEAG filed lawsuits against each other over the Vogtle dispute.
"These risks have been magnified by the existence of litigation between JEA and MEAG Power which raises questions about the legal status of the [power purchase agreement]," Moody's said, casting doubt on the municipal utility's willingness to abide by the take-or-pay term under the contract. "We view this effort to effectively repudiate the PPA contract as being inconsistent with the Aa rating category."
The ratings action affects approximately $2.3 billion of revenue bonds. It also includes the downgrade of the St. Johns River Power Park System revenue bonds to A2 from Aa2 and Bulk Power Supply System revenue bonds (Plant Scherer revenue bonds) to A2 from Aa2. The outlook remains negative.
In connection with this downgrade, Moody's also lowered the city of Jacksonville's issuer rating to A2 from Aa2 and revised the outlook to negative from stable. The rating agency said the ratings action is driven by the city's participation in the litigation against MEAG to invalidate the power purchase agreement.
Georgia Power is a subsidiary of Southern Co.