Fitch Rates Georgia Power Senior Notes 'A+'; Outlook Stable
NEW YORK -- November 15, 2012
Fitch Ratings has assigned an 'A+' rating to Georgia Power Company's (Georgia
Power) issuance of $400 million series 2012D 0.625% senior notes due Nov. 15,
2015. These notes are senior, unsecured obligations of Georgia Power. The
Rating Outlook is Stable.
The net proceeds from the offering will be used for the redemption of Georgia
Power's $100 million series 2007F 6.05% senior monthly notes due Dec. 1, 2038
and for general corporate purposes, including the continuous construction
program at the company.
Georgia Power's ratings are supported by the solid financial profile of the
integrated utility which benefits from constructive regulation in Georgia that
limits regulatory lag. Currently, the utility is in the midst of a significant
capital program that includes the construction of two new nuclear units at the
Vogtle site. The execution risk associated with this significant project and
the attendant external financing needs are also considered in the ratings. The
Stable Outlook reflects the expectation that the company will continue to
receive constructive regulatory treatment of the pre-approved projects
including recovery of costs during the construction period.
Capital projects, in addition to Georgia Power's $6.2 billion share of Vogtle
costs, include up to 2,500 megawatts (MWs) of gas-fired combined cycle
capacity at Plant McDonough that will more than offset the retiring coal-fired
capacity. The remaining coal-fired power plants will require ongoing spending
for environmental compliance. Georgia Power's annual capital expenditures are
forecasted to be in the $2 billion-$2.5 billion range over 2012-2014, or
approximately three times depreciation, for the next few years. This is a high
level relative to peer electric utilities. Approximately 36% of these
expenditures are related to new generation projects and 13% related to
Georgia Power's revenue increases resulting from the December 2010 base rate
settlement, bonus depreciation and significant fuel recoveries have resulted
in strengthening of cash flow credit measures. This has allowed Georgia Power
to embark on a heavy capital investment program with strong credit metrics.
Georgia Power's funds from operations (FFO) interest coverage ratio was 7.3x
for the LTM ended June 30, 2012, and FFO to adjusted debt was 24.5%. Fitch
anticipates a gradual decline in Georgia Power's financial ratios until 2014
under the current three-year rate settlement. The sales growth at Georgia
Power has slowed through the first nine months of 2012 due to the rising
uncertainty around economic growth. Persistently weak sales could put
additional pressure on credit metrics through 2014.
Fitch expects Georgia Power's coverage metrics to remain strong relative to
its rating category until 2014; however, the leverage ratios are expected to
be modestly weaker reflecting the pressure from a large capital intensive
construction program. Fitch forecasts Georgia Power's adjusted debt to EBITDA
and FFO to adjusted debt to be approximately 3.3x and 21.5%, respectively, in
What Could Trigger a Rating Action
Project Execution: Successful execution of nuclear plant construction and
continued regulatory support is key to maintaining rating stability at Georgia
Power. In this regard, Fitch will continue to monitor the construction
timelines, frequency and nature of any license amendment requests to the NRC,
potential escalation of the project costs, and outcome of the periodic
monitoring reports filed by Georgia Power at the Georgia Power Public
Commission (GPSC). Cost overruns or delays in the Vogtle project could
pressure cash flow and ratings.
Rate Case Outcome: Georgia Power is required to file a rate case by the middle
of 2013 for rates to be effective January 2014. Any adverse outcome in future
rate proceedings or any adverse change in Georgia Power's relations with the
GPSC, which are currently not anticipated, would also likely lead to negative
Positive Rating Actions Unlikely: Positive rating actions for Georgia Power
are considered unlikely while the Vogtle project is underway.
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Corporate Rating Methodology' (Aug. 8, 2012);
--'Recovery Ratings and Notching Criteria for Utilities' (May 3, 2012);
--'Rating North American Utilities, Power, Gas and Water Companies' (May 16,
Applicable Criteria and Related Research:
Corporate Rating Methodology
Rating North American Utilities, Power, Gas, and Water Companies
Recovery Ratings and Notching Criteria for Utilities
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Shalini Mahajan, CFA, +1-212-908-0351
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New York, NY, 10004
Lindsay Minneman, +1-212-908-0592
Glen Grabelsky, +1-212-908-0577
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