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Fitch warns of potential downgrades of Vogtle nuke co-owners

Fitch Ratings has put the co-owners of the Alvin W. Vogtle nuclear plant expansion project on negative watch after another increase in estimated construction costs.

Additionally, the rating agency downgraded Georgia Power Co.'s long-term issuer default rating, or IDR, to BBB+ from A-; Oglethorpe Power Corp.'s $3.05 billion first mortgage bonds and Development Authorities of Appling, Burke, Heard and Monroe counties' $858.2 million pollution control bonds to A-; and the Municipal Electric Authority of Georgia's, or MEAG, $4.72 billion project bonds to A.

Georgia Power owns 45.7% of the two existing and two planned Vogtle units, Oglethorpe Power owns 30%, MEAG owns 22.7% and Dalton Utilities owns 1.6%. Georgia Power and Southern Nuclear Operating Co. assumed project management from original contractor Westinghouse Electric Co. LLC after it declared bankruptcy in March 2017.

The ratings warning is related to the increase in "estimated costs for Georgia Power to complete Vogtle 3 and 4 units to $8.4 billion from $7.3 billion previously," which Georgia Power announced Aug. 8. Fitch said it is concerned with the magnitude and the timing of the project cost increase. Georgia Power went through a detailed budgeting exercise with input from multiple third parties less than a year ago to come up with its estimate to complete the two new units and received the regulatory approval to go ahead with the project in December based on that estimate.

Oglethorpe Power's cost share in the project has increased by $690 million, and MEAG's share increased by $500 million.

The co-owners have scheduled a vote in September of whether to continue going ahead with construction. The outcome of that decision may result in a ratings downgrade, Fitch said.

Other rating agencies have already taken actions on their ratings of Georgia Power and its parent company, Southern Co.

Due to parent subsidiary ratings linkages, Fitch has also placed the IDRs of Southern, Alabama Power Co., Southern Power Co., Southern Co. Gas, Atlanta Gas Light Co., Nicor Gas Co. and Southern Electric Generating Co. on negative watch. Gulf Power Co.'s rating remains unchanged at A-/F2 because it is in the process of being sold to NextEra Energy Inc.