Contractor’s woes prompt credit review

Georgia Power, other partners face possible downgrade by major bond rating firms.

Last week’s bankruptcy filing by the Plant Vogtle nuclear project’s key contractor has prompted a review of the credit ratings of Georgia Power and other partners.

The three major bond rating firms said they put Georgia Power’s debt under review with a “negative outlook,” meaning the review could lead to a downgrade. They cited the likelihood of more delays, cost overruns and other issues as a result of Westinghouse Electric’s March 29 bankruptcy filing.

Westinghouse designed the two new reactors and oversees construction at the Vogtle complex near Augusta. Cost overruns on that project and another in South Carolina have saddled Westinghouse and parent Toshiba Corp. with $9.9 billion in losses.

The debt of Georgia Power’s parent, Atlanta-based Southern Co., and some of its subsidiaries, also is under review by two of the credit-rating firms, Standard & Poor’s and Fitch Ratings.

Moody’s, which already has a lower rating on Southern Co.’s debt, also said it is reconsidering ratings for two other co-owners of the Plant Vogtle project, Oglethorpe Power and MEAG Power. Those companies supply wholesale electricity to dozens of electric cooperatives and cities throughout Georgia.

None of the ratings agencies have cut debt ratings on the electric utilities yet. That would likely lead to higher interest rates on the companies’ future debt issues, and higher costs for their customers.

Currently, Georgia Power and MEAG are rated “A3” and “A2,” respectively, by Moody’s, in the middle range for investment-grade debt. Oglethorpe Power gets a lower “Baa1” rating from Moody’s — still investment grade but a notch lower than Georgia Power.

Southern Co. has a still lower rating, “Baa2,” on Moody’s scale, two notches above junk debt status, or the level at which many pension plans and other institutional investors won’t buy its bonds. The other two bond rating firms give Southern Co. higher marks that are just below Georgia Power’s.

A Southern Co. spokesman, Schuyler Baehman, said the company is focused on remaining financially sound.

“We remain committed to demonstrating the high degree of financial integrity that has enabled Southern Company to deliver customer and shareholder value over time,” he said.

Fitch said any rating cut for Georgia Power and Southern Co. will likely be limited to one notch unless the fallout from Westinghouse’s bankruptcy is worse than it expects.

“More severe rating actions” could happen, Fitch said in its report, if Georgia Power has to

take over running the Vogtle project and Georgia’s state utility regulator, the Georgia Public Service Commission, doesn’t protect it from future cost overruns by allowing it to pass along those costs to its customers. The debt rating firms and other observers expect Westinghouse to use the bankruptcy process to tear up the fixed-price contracts that forced it absorb many cost overruns. Westinghouse continues to work on the project but is supposed to reveal its intentions for the Vogtle contract by April 28 under an interim agreement, unless it is extended.