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Moody's revises Oglethorpe Power's outlook to stable from negative

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Moody's revises Oglethorpe Power's outlook to stable from negative

Moody's on Oct. 8 changed the rating outlook of Oglethorpe Power Corp. to stable from negative, citing the unanimous decision of the Vogtle nuclear plant owners to continue expanding the facility.

"Although the complexity of the Vogtle project increases the prospects for additional construction delays and cost over-runs, the magnitude is not expected to further jeopardize [Oglethorpe's] credit quality, particularly when considering the terms of the revised [joint owners agreement] and term sheets which include several forms of mitigation and cost shifting should future construction project costs exceed the currently revised budget," Moody's analysts wrote.

On Sept. 26, the Vogtle owners resolved to keep building two new nuclear reactors at the facility. Under their amended agreement, there would be cost shifting among the owners if the spending exceeds the August 2018 budget. However, Southern Co. subsidiary Georgia Power Co., as lead owner, retains the right to cancel the reactors if completion costs exceed prescribed thresholds.

"The stable outlook also incorporates the strong contractual ties that [Oglethorpe] has with its members and our prospective view that management and the board will ultimately exercise rate autonomy so that [Oglethorpe's] weak financial metrics will revert back to stronger levels in support of the credit profile once the project costs are fully incorporated into the wholesale power rates charged to its members," Moody's said.

Moody's affirmed Oglethorpe's senior secured first mortgage bonds and senior secured tax-exempt revenue bonds ratings at Baa1, issuer rating at Baa2 and short-term rating for commercial paper at P-2.

The Vogtle nuclear power plant is 45.7% owned by Georgia Power, 30% by Oglethorpe, 22.7% by the Municipal Electric Authority of Georgia and 1.60% by the city of Dalton, Ga. A portion of the output of the two new reactors will be sold to JEA under a power purchase agreement with MEAG.