Late-stage changes to Vogtle nuclear construction activities are credit negative: Moody's

Dive Brief:

Moody's issued a credit negative rating on Wednesday for Georgia Power's resequencing of construction activities for its Plant Vogtle expansion project.
Georgia Power on June 23 announced changes to the timing of a structural integrity test and integrated leak rate testing. Moody's said the late-stage changes to the planning activities signal "that challenges with the project continue, increasing the likelihood of additional cost overruns and further schedule delays."
Vogtle Unit 3 is expected in-service in May 2021, with Unit 4 coming online the following year, according to Georgia Power and Southern Nuclear Company's "aggressive" site work plan. Those dates are not changing based on recent test timing changes.

Dive Insight:

The ratings agency's decision comes as the Vogtle expansion grapples with a variety of unforeseen issues due to the COVID-19 pandemic.

"This shift in planned activities is primarily the result of continued challenges in electrical construction productivity, a previously implemented workforce reduction and adjustments to work practices at the project site amid the coronavirus pandemic," Moody's wrote.

Georgia Power announced staff reductions would continue late into the summer in April, after Southern Company confirmed 42 construction workers tested positive for COVID-19. Its share of the incremental cost of the workforce reduction would be between $15 million to $30 million, it said.

The utility's long-term rating remains stable and unchanged at Baa1, according to Moody's, but the particular event for the project is credit negative. The goes from Aaa to C.

"Those ratings really matter to investors," Paul Patterson, analyst at Glenrock Associates, told Utility Dive, adding that Georgia Power retains "quite a bit of margin from an equity perspective."

Moody's does not view Georgia Power's June 23 announcement as positive because "it's a complex situation you're changing, you're realigning things to this point," he said. "I guess it makes it a little bit uncomfortable, but not enough" to change the utility's rating.

The expansion is more than a decade in the making, originally anticipated to come online in 2016 and 2017, respectively.

Vogtle's units must meet November 2021 and November 2022 in-service dates for regulators and an independent monitor of the construction, Vogtle Monitoring Group, assessed Units 3 and 4 as "highly unlikely" to meet those goals, based on its reviews of the project.

Georgia Power is the majority owner of Vogtle Units 3 and 4, alongside Oglethorpe Power, MEAG Power and the city of Dalton, Georgia's Combined Utility Entity.