Fitch: New Nuclear Plant May Spur Few More

NEW YORK, Feb 10, 2012 -- BUSINESS WIRE

Fitch Ratings believes that the Nuclear Regulatory Commission's (NRC) vote on February 9 approving the combined construction and operating license (COL) for Plant Vogtle Units 3 and 4 is a significant milestone in the development of new nuclear capacity in the US but has limited impact on credit. The new reactors are being developed by Southern Company subsidiary, Georgia Power Company (GPC) along with its partners the Municipal Electric Authority of Georgia (MEAG), Oglethorpe Power Corporation (OPC), and the city of Dalton, GA. More than 30 years have passed since the last COL was granted in the U.S.

For GPC, MEAG, and OPC, the project is a significant, long-term capital investment in baseload capacity. The two public power utilities have already prefunded, through debt issuance, a substantial portion of their share of the construction costs. GPC will rely on a combination of Department of Energy loan guarantees and traditional utility funding sources. The utility benefits from constructive rate treatment of project costs including recovery of construction work in progress on financing costs.

Passage of the COL was helped by the use of the Westinghouse AP 1000 design, which provides state of the art safety features. We continue to expect the approval of the COL for the VC Summer Units 2 and 3, in part because they also utilize this design. The new Summer units are being developed by South Carolina Electric & Gas Company and South Carolina Public Service Authority (Santee Cooper).

We believe that new COL applications beyond those in process are unlikely in the near term. Despite significant enthusiasm for nuclear power in recent years as an alternative to fossil generation, diminished load growth in the slow economy and historically low natural gas and wholesale electric prices have dampened interest. Combined with lower prospects for carbon emission regulations and evolving safety standards following the events at Fukushima, the industry's focus has shifted to maintenance of the nation's existing nuclear fleet.

Details of the approval are not yet available. Fitch will review them as soon as they are made available to us to evaluate the conditions included in the COL and any impact they may have on the cost or timing of completion.

Additional information is available on www.fitchratings.com

The above article originally appeared as a post on the Fitch Wire credit market commentary page. The original article can be accessed at www.fitchratings.com. All opinions expressed are those of Fitch Ratings.

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SOURCE: Fitch Ratings

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