Fitch Rates Georgia Power's $500MM Series 2010C 4.75% Senior Notes 'A+'; Outlook Negative

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has assigned a rating of 'A+' to Georgia Power Company's (GPC) $500 million series 2010C 4.75% senior notes due Sept. 1, 2040. The Rating Outlook is Negative. The notes will only be redeemable, in whole or in part, at the option of GPC through the make-whole call provision. The notes are unsecured and will rank equally with other senior unsecured debt of GPC.

Proceeds from the sale will be used by GPC to repay all or part of (1) $250 million series X 5.70% senior notes due Jan. 15, 2045; (2) $125 million series W 6.0% senior notes due Aug. 15, 2044; (3) $100 million series T 5.75% senior Public Income NotES (PINES) due Jan. 15, 2044; and (4) $35 million of Savannah Electric and Power Company's series G 5.75% senior notes due Dec. 1, 2044, which were assumed by GPC in July 2006.

GPC's ratings are supported by its low-risk utility business, a constructive state regulatory regime, manageable debt maturities, and strong operation of predominantly baseload electric generation assets.

Rating concerns facing GPC include the potential financial stress associated with a large capital expenditure program, risks associated with the undertaking of nuclear plant construction, and additional costs imposed by any new environmental compliance regulations, including those controlling greenhouse gas emissions, that are likely to require additional rate support. Driving the large capital expenditure program are new capacity additions, including construction of McDonough natural gas combined cycle units, environmental upgrades, and a planned dual unit nuclear expansion at Plant Vogtle. GPC's construction and regulatory risks for Vogtle 3&4 units are mitigated in part by a Georgia state law that permits cash return on construction work in progress (CWIP) for approved nuclear projects. GPC has received a conditional commitment for loan guarantees from the U.S. Department of Energy for the construction of the two nuclear units.

Based on the first half 2010 financial results, GPC's credit metrics have recovered somewhat from 2009 cyclical lows driven by favorable weather and a rebound in industrial sales, yet remain modestly weak for its rating category. Fitch anticipates the weakness in credit metrics to persist as the electric demand recovers slowly to pre-recession levels and capital expenditures remain elevated, partially offset by a phased in recovery of the under-recovered fuel balance as stipulated by the 2010 fuel case. A constructive rate outcome in the pending base rate case, expected to be resolved before the end of 2010, is crucial to re-align GPC's credit metrics to Fitch's expectation for its current rating and could result in a reversion to a Stable Rating Outlook. A less-than-constructive decision, however would likely result in a one-notch downgrade.

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

The relevant criteria used to determine the ratings of GPC are listed below and available on Fitch's web site at 'www.fitchratings.com':

--'Corporate Rating Methodology', Aug. 13, 2010;

--'Credit Rating Guidelines for Regulated Utility Companies' July 31, 2007;

--'U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and Financial Guidelines' Aug. 22, 2007;

--'Utilities Sector Notching and Recovery Ratings', March 16, 2010.

Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=546646

Credit Rating Guidelines for Regulated Utility Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=334652

U.S. Power and Gas Comparative Operating Risk (COR) Evaluation and Financial Guidelines

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=338030

Utilities Sector Notching and Recovery Ratings

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=504546

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