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Announcement:

Moody's places Oglethorpe Power on Review for Downgrade; Affirms Prime-2

14 Sep 2010

New York, September 14, 2010 -- Moody's Investors Service placed on review for possible downgrade the long-term ratings of Oglethorpe Power Corporation. ("Oglethorpe"), including the Baa1 issuer rating and the A3 senior secured rating. At the same time Moody's affirmed Oglethorpe's Prime-2 short-term commercial paper rating.

The review for downgrade reflects our view that Oglethorpe has materially increased its business risk with a sizeable multi-year capital spending plan that elevates its risk profile without any meaningful improvement in key financial credit metrics. In fact, Moody's believes Oglethorpe's prospective cash flow to debt ratios are likely to fall to the low-single digits over the next few years.

The centerpiece of the build-out, at approximately $4.2 billion, is Oglethorpe's 30% participation in the expansion of the Vogtle nuclear facility in Waynesboro, Georgia. While new nuclear construction brings its own unique challenges, the company has also announced future investment in required environmental controls at existing facilities plus new generation that may include new natural gas and bio-mass generation facilities. Combined, these investment plans substantially increase balance sheet debt, while cash flows are expected to rise moderately.

Moody's acknowledges Oglethorpe's positive credit qualities including its large size relative to its electric cooperative peers in the U.S., owned low-cost base-load electric generating profile, long-term wholesale power supply contracts (through 2050) with its 39 member-owners in the state of Georgia, and the relatively healthy financial profile of its members. Importantly, the rating also considers the company's absence of regulation at the state level with respect to rate-setting. Nevertheless, Oglethorpe's credit metrics are weak for its current rating category and when considering the capital investments expected over the next several years. For example, Oglethorpe's funds from operations to debt of approximately 4% is below the 6-10% range for the "A" rating category for electric cooperatives and the company's equity to capitalization at 10% is materially below the 20-35% range for the "A" category (both metrics as of June 30, 2010). We believe these credit metrics will continue to be pressured and that further rating stress could develop over time, unless a more meaningful mitigation effort develops.

In addition to the construction risk, Oglethorpe will need to carefully manage its liquidity profile with respect to the financing risks associated with its various projects. At this time Oglethorpe's liquidity appears adequate. Oglethorpe continues to maintain approximately $1.1 billion of credit lines ($475 million of which is a syndicated revolver expiring in 2012 that it primarily uses as backup to its commercial paper program). At June 30, 2010, approximately $600 million was available under these lines and the reported cash balance was $363 million.

Capital spending in 2010 will likely approach $800 million (including interest during construction); clearly a level that will require significant external financing. As Moody's understands it, Oglethorpe intends to use a combination of internal cash flows, the public debt capital markets and beginning in 2011, potential advances under the DOE loan program, to help fund its pro-rata obligations for the Vogtle construction. Moody's incorporates an expectation that up to 70% of Vogtle costs may be funded under the DOE program.

Moody's review will consider the potential impact that Oglethorpe's capital plan will have on key credit metrics as well as the company's willingness to support this build-out with near-term rate increases. For example, to the extent Oglethorpe expenses rather than capitalizes interest during construction, we would expect a lower level of external finance and more stable credit metrics. Additionally, any future challenges to the Vogtle project including delayed timing or increased cost, could place further stress on the rating.

The principal methodology used in rating Oglethorpe was U.S. Electric Generation & Transmission Cooperatives rating methodology published in December 2009. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website. Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

Headquartered in Tucker, Georgia, Oglethorpe Power Corporation is a generation-only electric cooperative owned by and supplying power to its 39 distribution cooperative members (representing approximately 4.1 million people) in the state of Georgia. Oglethorpe owns approximately 5,790 MW's of generating capacity and reported revenues of $1.1 billion in 2009.

New York
James O'Shaughnessy
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
James Hempstead
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's places Oglethorpe Power on Review for Downgrade; Affirms Prime-2
No Related Data.
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