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Rating Action:

Moody's upgrades Municipal Electric Authority of Georgia's Plant Vogtle Units 3&4 Project J revenue bonds rating to Baa1 from Baa2; rating outlook is positive

11 Sep 2020

Approximately $2.0 billion of debt securities affected

New York, September 11, 2020 -- Moody's Investors Service has upgraded Municipal Electric Authority of Georgia's Plant Vogtle Units 3&4 Project J (MEAG Project J) $2.0 billion outstanding senior revenue bonds' rating to Baa1 from Baa2. The rating outlook is revised to positive from rating under review, with such review concluded after commencing on August 10, 2020.

RATINGS RATIONALE

Today's rating action considers the credit quality of JEA, FL - Electric Enterprise (JEA: A2 Positive) along with the final terms of the settlement agreement between Municipal Electric Authority of Georgia (MEAG Power) and JEA which are viewed as credit positive to MEAG Project J. The settlement agreement which was reached on July 30th and executed on August 13th resolved all disputed issues relating to the new Units 3 and 4 of the Alvin W. Vogtle Electric Generating Plant ("Plant Vogtle"), and the Amended & Restated Power Purchase Agreement (PPA) dated as of December 31, 2014 (the Project J PPA) including additional compensation obligation to MEAG Power from JEA, while also giving JEA a right of first refusal, subject to the rights granted to the Project J Participants in their Power Sales Contracts, to purchase any entitlement share of a Project J participant in the 21st year following commercial operation (COD) of the Vogtle Units 3&4.

The additional compensation obligation payable by JEA to MEAG Power equals $0.75 per MWh of energy delivered to JEA under the PPA which amounts to around $1.2 million per year (assuming a 90% capacity factor of the Vogtle units). While these amounts are not pledged to the Project J Bonds or the Project J DOE Guaranteed Loan, it provides some modest additional liquidity to MEAG Power and its members over the life of the Project J PPA.

JEA's right of first refusal could surface should another Project J participant wish to sell its share of output from Project J. JEA's right of first refusal begins after the 10th year following COD of the first of Vogtle Units 3&4, and will last until the end of the 20th year following such COD, which is also when the Project J PPA is set to terminate. JEA can exercise its right of refusal by paying the greater of the price that would be offered by a third party purchaser or fully embedded costs as provided for in the Project J Power Sales Contract. This optionality is viewed as credit positive for the project as it provides an avenue for JEA to consider a longer-term commitment in the Vogtle 3&4.

RATING OUTLOOK

The positive outlook considers the positive outlook at JEA, whose PPA with MEAG Power provides the sole source of repayment for the MEAG Project J bonds for the first 20 years of principal and interest on each series of bonds, and factors in continued expectation that construction progress will be made to meet the November 2021 and November 2022 in service dates for Units 3 and 4, respectively.

FACTORS THAT COULD LEAD TO AN UPGRADE OF THE RATINGS

-An improvement in JEA's credit profile could exert positive pressure on the rating which will be largely influenced by the progress made towards Vogtle 3&4's reaching commercial operations and attaining successful operations

FACTORS THAT COULD LEAD TO A DOWNGRADE OF THE RATINGS

-A negative action could result if there is any material decrease in currently strong regulatory, political, public and co-owner support for the Vogtle project

-A rating downgrade could also be driven by a significant construction delay in the Vogtle project that substantially increases the project costs leading to an impairment or abandonment decision by the co-owners

LEGAL SECURITY

The Project J bonds are secured by a pledge of the Bondholders' Trust Estate under the Project J Bond Resolution which includes proceeds of the sale of Project J bonds and a pledge of the Shared Trust Estate under the Project J Bond resolution on parity basis with debt service on the Project J DOE guaranteed loan, which includes revenues derived from the Project J PPA contracts between MEAG Power and JEA and between MEAG Power and its Project J participants. The payments are required whether or not the project is constructed or operable.

A fully funded maximum annual debt service reserve is available for Project J. JEA will pay (a) all operating costs of Project J attributable to each of Vogtle Units 3&4 for the first 20 years after commercial operation of each unit and (b) the first 20 years of debt service costs of Project J attributable to each of Vogtle Units 3&4. After the 20-year period during which JEA is responsible for the payment of operating and debt service costs, those costs become the obligations of the 39 MEAG Power Project J participants.

For Project J, the underlying contracts were validated in the Superior Court of Fulton County, Georgia by judgments on November 18, 2008, on January 19, 2010, and on April 20, 2015.

PROFILE

MEAG Power has a 22.7% ownership interest (500.3 MW) in the 2,204 MW Vogtle Nuclear 3 and 4 project (Vogtle 3&4) which is under construction and is located adjacent to Vogtle Nuclear Units 1 and 2, near Augusta, Georgia. MEAG Power has broken its ownership into three projects: Project M (33.87% of the 22.7% ownership), Project P (24.955% of the 22.7% ownership) and Project J (41.175% of the 22.7% ownership).

METHODOLOGY

The principal methodology used in these ratings was US Municipal Joint Action Agencies Methodology published in August 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1207102. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Jennifer Chang
Lead Analyst
Project Finance
Moody's Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
US
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Angelo Sabatelle
Additional Contact
Project Finance
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
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New York, NY 10007
U.S.A
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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