Plant Vogtle: Fairly strong credit rating awarded $275 million in construction bonds
By David Pendered
A partner in the Plant Vogtle nuclear power plant project has received a fairly positive rating from Moody’s Investors Service on debt it plans to sell in September to continue its share of construction funding. That said, analysts advised potential investors of pending challenges and reminded of the upcoming construction status report due by Aug. 30.
The rating action released Wednesday affects about $275 million in bonds to be sold in September by Municipal Electric Authority of Georgia, according to a rating statement issued Wednesday by Moody’s. The rating is Baa2, which in Moody’s system represents a debt of medium grade and subject to moderate credit risk.
Analysts cited the following concerns regarding MEAG’s ability to repay the debt to be issued by PowerSouth:
- “Weakening of the credit quality of PowerSouth;
- “If there are significant further delays or cost overruns at the Vogtle project;
- “If there is any material decrease in currently strong regulatory, political, public and co-owner support for the Vogtle project, for example, as may surface in the combined 20th/21st Vogtle Construction Monitoring Report scheduled to be filed by Georgia Power Company by August 30, 2019;
- “Any signs of MEAG Power participants’ challenges to the nuclear project.”
The pending federal lawsuit filed by a partner in Florida remains a concern, but credit analysts outlined some reasons it will end favorably for MEAG/PowerSouth. Part of the positive outlook is the market’s favorable response to a $619 million debt offering MEAG completed in July:
- “While the outcome of litigation is still pending, MEAG Power’s legal strategies are likely to prevail considering three separate Georgia court bond validation procedures in which JEA was a participant and the July 2019 U.S. District Court – Florida decision to transfer JEA’s lawsuit to the U.S. District Court – Georgia.
- “Also, MEAG Power’s July 2019 financing for its Project J share of the Vogtle project evidences its ability to maintain good access to the public debt markets.”
The Moody’s report cited two factors that could lead to an upgrade of the credit rating:
- “Strengthening of the rating for PowerSouth;
- “Commencing of commercial operations for Vogtle Units 3&4 without further delays or cost overruns beyond the current schedule and budget.”
Regarding the second point in Moody’s’ list of four concerns, the Trump administration has signaled its ongoing support for the project.
As recently as March 22, U.S. Energy Secretary Rick Perry spoke in support of the project, and of nuclear energy as a significant portion of the country’s energy portfolio. Perry delivered a speech in Waynesboro in which he announced the government had reached a financial close for up to $3.7 billion in additional guarantees to finance continued construction at Plant Vogtle. The sum includes up to $415 million to the three subsidiaries of MEAG involved in the project, according to a DOE statement.
Perry said at the time:
- “A strong nuclear industry supports a reliable and resilient grid, and strengthens our energy and national security. As I’ve witnessed firsthand today, Vogtle is also an energy infrastructure project with a massive scope employing thousands of workers. This project is rebuilding a highly skilled U.S. nuclear workforce and supply chain for the future.”