Moody’s says credit outlook ‘negative’ for Georgia Power’s Vogtle

STORY UPDATE: Moody’s has revised the credit outlook for Vogtle co-owners, Oglethorpe Power Corporation and Municipal Electric Authority of Georgia (MEAG), from negative to stable. 

In a press release Friday, the credit agency attributed the revisions to the payment of the full Toshiba guaranty and the approval of Southern Nuclear and Bechtel as new management and contractors on site. 

Moody’s however retained Georgia Power’s negative credit outlook, attributing it to the risks associated with the ongoing management transition and the prospective challenges the company may face in meeting productivity levels and adhering to new cost and schedule targets.

ORIGINAL STORY: Moody’s Investors Services says the negative credit outlook for Georgia Power and two of its three partners in Plant Vogtle remains intact even after the recent vote by state regulators to continue construction.

The credit agency’s decision to lower the credit outlook for Georgia Power, Municipal Electric Authority of Georgia (MEAG) and Oglethorpe Power Corporation from stable to negative followed Georgia Power’s decision last year to recommend completion of the project, increasing the utility’s business and operational risks.

Moody’s sees the change from a fixed-contract to a cost reimburseable one as a potential for running additional costs, resulting in more financial risks for the utilities, and added financial risks for ratepayers.

Dan Aschenbach, Senior Vice President at Moody’s Investor Services said additional costs to the project could make it potentially more expensive than other types of fuels and result in an actual credit downgrade rather than the current negative outlook.

The decision by Moody to lower the credit outlook for the partner companies preceded a decision last month, in which the five commissioners at the Georgia Public Service Commission unanimously voted to approve Georgia Power’s revised costs and schedule for the project.

The two units initially set for completion in 2016 and 2017, will, according to Georgia Power’s new schedule, be done by 2022. The project costs are expected to almost double from $14 billion as anticipated in 2009 to $25 billion at completion.

Dalton utilities which owns 1.6 percent share of Vogtle is the only one of the four co-owners with a stable outlook. Aschenbach attributes this to a lack of debt by the utility which paid its capital costs for Vogtle in cash unlike the other co-owners.

Another agency lowers Vogtle owners outlook

In early December, Fitch Ratings Inc. also lowered the outlook for Georgia Power, Oglethorpe Power Corporation and MEAG.

Fitch’s ratings attributed the downgrades to the negative outlook presented by the magnitude of final project costs and ongoing uncertainties and risks related to construction completion.

Fitch also cited the lack of a fixed-price contract with the new project manager, Southern Nuclear, as was the case with the previous contractor Westinghouse Electric Company. The lack of a fixed-price contract, according to Fitch, signals imminent cost overruns.

Commission chairman Stan Wise admitted to reporters immediately after the yes vote on Vogtle in late December that he was still very concerned about the budget and the schedule. “It is an inherently risky project,” he told reporters.

Wise acknowledged the risks associated with the project, but maintained the commission could not overlook the $5 billion already invested in the two units.

Liz Coyle Executive Director at the consumer advocacy group Georgia Watch sees mounting risks related to the new technology being deployed at the plant. She says the continued lack of complete designs and detailed schedule that have plagued the project  are a major indicator of potential delays and additional risks, all of which Georgia Power says should fall on the ratepayer.

“We are now moving to a period of even greater uncertainty,” says Coyle, whose organization has been actively protesting the allocation of project risks on customers since 2009.

Volatility of Vogtle

2017 held significant changes for Vogtle. Lead project manager, Westinghouse Electric Company, filed for bankruptcy in March, resulting in a change of management to Southern Nuclear and Bechtel Corporation. Congress ommitted a provision extending the nuclear production tax credits, which Georgia Power hoped would have provided $800 million in tax credits towards the project. These changes dimmed the prospects for the projects’ progress, heightening calls for cancellation among consumer advocacy groups decrying the allocation of additional project costs on ratepayers.

Incentives to the project including the 2015 Federal Loan Guarantee Program temporarily boosted MEAG’s outlook to stable, while Georgia Power received a credit positive following news of Toshiba’s intent to pay its parent Guaranty upfront.

With a new contractor and management on board, Moody’s Aschenbach says it’s possible for the current outlook for the companies to be stabilized if productivity levels at the site increase. He however, sees the uncertainties surrounding the use of the untested technology at the plant and the threat of significant cost overruns as possible pointers to future negative credit ratings.

“I can’t say for sure there would be a downgrade, but certainly the negatives could point it to that direction,” says Aschenbach.

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