Fitch Rates Oglethorpe Power's (Georgia) $115MM Pollution Control Revs 'A'; Outlook Stable

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned an unenhanced 'A' rating to the following Georgia Development Authority pollution control revenue bonds to be issued on behalf of Oglethorpe Power Corporation (OPC):

Development Authority of Heard County

--$7.5 million (OPC Wansley Project), series 2009A.

Development Authority of Monroe County

--$10.9 million (OPC Scherer Project) series 2009A;

--$93.6 million (OPC Scherer Project) series 2009B.

Fitch has also affirmed OPC's outstanding debt as highlighted below:

--$1.55 billion first mortgage bonds at 'A';

--$882 million parity pollution control revenue bonds (issued for the benefit of OPC by various Georgia development authorities) at 'A';

--$27 million OPC Scherer Funding Corporation bonds relating to a capital lease at 'A'.

--$450 million commercial paper (CP) program at 'F1'.

The Rating Outlook for all bonds is Stable.

The bonds will be issued as variable-rate demand bonds (VRDBs) initially in a weekly rate mode. The bonds will be secured by revenues pledged pursuant to a loan agreement and the related note for such series. The note to each series of bonds is in turn secured by a first mortgage lien on substantially all of OPC's owned tangible and certain intangible assets. Proceeds will finance OPC's portion of various pollution control projects at the Wansley and Scherer coal-fired generating stations and to refinance a portion of the outstanding pollution control debt.

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, reflective of its ability to automatically pass through to its members' actual energy costs - including fuel and purchased power in a timely manner. Member retail rates remain competitive for the region.

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 impacted less compared to entities with more fossil fuel powered plants.

The primary credit concern is OPC's sizeable future debt plans. The Stable Outlook reflects Fitch's opinion that OPC has developed a reasonable capital expenditure strategy and a belief that once these future projects come on line, costs should remain 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, including Vogtle #3 and #4. 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, Fitch assumes that necessary rate increases will be implemented in order for OPC to maintain a financial profile supportive of an 'A' rating.

OPC is undertaking a large capital expansion program to meet future energy needs of its members, which includes a 30% participation (660 MW) in the Vogtle nuclear unit #3 & #4 plant expansion project. Construction of the two expansion AP 1000 nuclear units is a project of massive scale. As with any project of such size and scope, Fitch will focus on the credit risk during the construction period and long-term cost implications. OPC has developed and continues on its strategy to bolster its cash and liquidity, build a strong balance sheet and increase financial metrics in anticipation of the sizable $7.5 billion to $9 billion capital expansion program that it will undertake through 2017.

Going forward, OPC plans to use its CP program to make required payments related to Vogtle #3 & #4, and possibly as short-term funding for additional generation construction.

OPC continues on its strategy to build up its liquidity position. When the various liquidity facilities, cash and commercial paper capacity available are included, OPC's operating liquidity on hand is robust. OPC plans to continue to increase its overall liquidity targets from approximately $1.4 billion in 2009/2010 to a peak of approximately $2.2 billion in 2013/2014 (the highest expected capital spends years) as it launches into building mode.

OPC 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%. OPC supplies its members approximately 65% of their total requirements from its owned generation. Currently OPC owns 5,500 MW of diversified generation and schedules an additional 1,271 MW of capacity on behalf of its members.

Additional detailed information on OPC is available in Fitch's Oct. 28 new issue credit report, available at 'www.fitchratings.com'.

Additional information is available at 'www.fitchratings.com'

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.