NEW YORK - (Business Wire) Fitch Ratings assigns an 'A' rating to $380,370,000 various Georgia Development Authorities pollution control revenue bonds (PCRBs), issued for Oglethorpe Power Corporation (OPC) Projects. The bonds are being issued as follows:
--$320.72 million Development Authority of Burke County (Burke bonds)- Oglethorpe Power Corporation Vogtle Project, consisting of $40.15 million Series 2008D; $111.57 million Series 2008E; and $169 million Series 2008F;
--$42.795 million Development Authority of Monroe County (Monroe Bonds)- Oglethorpe Power Corporation Scherer Project, Series 2008A;
--$7.455 million Development Authority of Heard County (Heard Bonds) - Oglethorpe Power Corporation Wansley Project, Series 2008A;
--$9.4 million Development Authority of Heard County (Heard Bonds) - Oglethorpe Power Corporation Wansley Project, Series 2008B (AMT) .
At the same time, Fitch affirms OPC's outstanding first mortgage bonds and outstanding PCRBs issued for the benefit of OPC by various development authorities, and the 'A' rating on the OPC Scherer Fund Corp. bonds. Fitch also affirms the 'F1' short-term rating for OPC's $450 million commercial paper (CP) program. The Rating Outlook is Stable.
As part of OPC's tax-exempt debt restructuring plans, proceeds will refund various series of Burke, Heard and Monroe variable-rate bonds. After this financing, OPC will have eliminated all of its variable-rate exposure. OPC also expects to issue additional taxable fixed-rate bonds in February 2009.
The bonds are expected to sell Dec. 1, 2008.
OPC has a $450 million CP program. Upon bond issuance, there will be no CP outstanding. OPC has sufficient liquidity, with a backup line of credit of $450 million that expires in July of 2012. OPC also has a $50 million line of credit with National Rural Utilities Cooperative Finance Corp. (CFC) and a $50 million line of credit with Co-Bank.
The 'A' rating reflects OPC's stable member base, supported by take-or-pay joint and several contracts running through 2050. Also factored into the rating is OPC's proven cost recovery, reflecting its ability to automatically pass through to its members actual energy costs - including fuel and purchased power in a timely manner. There continues to be strong energy and demand growth and projections depict this growth to continue, through at least 2017. During the period 2001 through 2006, demand grew at a rate of 5.4%, while energy grew at 5.3%.
As is the case with many utilities, OPC will likely be affected by changing environmental regulations, including the costs associated with carbon emissions. However, OPC's power portfolio is diverse, with a large nuclear component, therefore it is likely to be affected less compared to entities with more fossil fuel powered plants.
The primary credit concern is the significant future debt plans, expected to exceed $7 billion. The Stable Outlook reflects Fitch's belief that once these future projects come on line, costs should be in line with other regional utilities and will be passed through to the members. Also, many of the utilities in the region are entering into similar power projects/contracts. OPC's additional resources are expected to come on line in stages, starting in 2014. Fitch will monitor the specifics of the financings and their credit impacts on OPC, once definitive plans are available. However, it is assumed that necessary rate increases will be implemented in order for OPC to maintain a financial profile supportive of an 'A' rating. In the event OPC's debt burden increases to a point that is above the average relative to the region, there may be negative rating implications.
OPC's financial operations have been stable. As is the case with many wholesale cooperatives, debt-service coverage is essentially 1.0 times (x), with a 1.10 margin-for-interest (MFI) requirement being met. The 1.10x MFI produced a $19.1 million net margin in 2007, versus a net margin of $18.2 million in 2006. For 2009, Oglethorpe's board approved a budget to achieve a 1.12x MFI ratio.
Oglethorpe is the largest cooperative in the United States in terms of kWh (kilowatt hour) sales, with 38 members that serve 1.7 million Georgia customers and a population estimated at 4.1 million. No single member accounts for more than 13.3% of total revenues, although the three largest members combined total 35.6%. These three largest members are Cobb EMC, Jackson EMC and Sawnee EMC, accounting for 13.3%, 12.3% and 10%, respectively. In 2007, OPC supplied its members approximately 63% of their total requirements from approximately 5,200 megawatts (MW) of diversified owned generation and purchased capacity.
For additional information on OPC, please see Fitch's credit report dated Aug. 22, 2008, available on www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Joanne Ferrigan, +1-212-908-0399
Karl Pfeil, III, +1-212-908-0516
Chris Jumper, +1-212-908-0594
Cindy Stoller, +1-212-908-0526 (Media Relations)
cindy.stoller@fitchratings.com
