Fitch: Domino Effect Unlikely from US Nuclear Plant Closures
NEW YORK, Oct 22, 2012 -- BUSINESS WIRE
Low power prices as a function of weak demand in the Midwest
and the lack of a capacity market within the Midwest Independent
Transmission System Operator region have led Dominion Resources
to shut down its Kewaunee plant in Wisconsin, according to Fitch
Ratings. Dominion said it would close the plant during the
second half of 2013.
A significant increase in U.S. natural gas output has
translated to historically low power prices. Those prices,
coupled with a limping U.S. economic recovery, led to a
significant decrease in demand.
We believe Dominion's decision to close Kewaunee is
indicative of a difficult operating environment for merchant
nuclear plants in the Midwest. This is the first closure of a
U.S. nuclear plant as a result of extremely low, long-term power
prices. While other small, single-unit merchant nuclear plants
may also be at risk for closure, we feel any such decision would
depend on management strategies and the existence of power
purchase contracts.
The economics of Kewaunee is also hindered due to the fact
that it is a single-unit, merchant nuclear plant located outside
of Dominion's existing merchant fleet footprint. The 556 MW
capacity plant began operation in 1974 but was acquired by
Dominion in July 2005. Its Nuclear Regulatory Commission license
was renewed in February 2011 for an additional 20 years,
extending through to 2033.
We do not expect the closure of Kewaunee to have a material
impact on financial metrics or the company's credit profile. We
have an issuer default rating of 'BBB+' with a Stable Rating
Outlook for Dominion Resources, Inc.
Dominion will recognize a one-time after-tax charge of $281
million in the third quarter of 2012 related to the
decommissioning of Kewaunee. We believe the plant's contribution
to earnings is modest. Management also expects that amounts
available in the decommissioning trust plus expected earnings
will be sufficient to cover decommissioning costs.
Additional information is available on www.fitchratings.com.
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SOURCE: Fitch Ratings
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