Moody's: Nuclear Delays Loom

BRADENTON, Fla. — Japan’s Fukushima accident has created “unpredictable unintended consequences” that can be expected to delay the approval of new and existing nuclear energy facilities, according to a special report Thursday by Moody’s Investors Service.

The March 11 earthquake and subsequent tsunamis at the Fukushima nuclear plant continue to have negative credit implications for the sector, though Moody’s said it anticipates no rating changes related to event risks such as earthquakes, hurricanes, cyber-attacks, equipment failure, or operator error.

“What is changing is our view of the sheer magnitude of liability associated with an event risk occurrence,” said a report by Moody’s senior vice president Jim Hempstead.

Hempstead said Fukushima raises questions about two fundamental credit assumptions — a population willing to accept the costs of radiation and that its government will stand behind long-term liabilities.

“Today, we see increased political intervention across many regions and intensified regulatory scrutiny across all jurisdictions,” Hempstead said. “More importantly, emboldened opposition forces are mobilizing their arguments against nuclear power, a material wildcard for the U.S., where a presidential election cycle in about to commence.”

Delays are expected in the permitting and licensing for new reactors and license extensions due to more regulatory scrutiny and increased social opposition.

The report lists 19 municipal power entities with exposure to nuclear generation, including the Municipal Electric Authority of Georgia, which sold $2.67 billion of taxable Build America Bonds and $48 million of tax-exempt bonds in March 2010 to finance its 22.7% ownership in two new nuclear units at the Vogtle Nuclear Power Plant near ­Augusta.

Unlike Japan’s reactors, which are primarily dependent on electricity to power water cooling facilities, Vogtle’s new units are designed with Westinghouse AP1000 technology that relies on passive safety systems such as gravity, natural circulation, convection, compressed gas, and condensation to maintain safe operations and shut down procedures.

The new Vogtle units were expected to receive final licensing later this year from the U.S. Nuclear Regulatory Commission.

On Wednesday, 13 environmental organizations filed a petition asking the NRC to immediately suspend or postpone rulemaking for the certification of AP1000 while the NRC investigates the implications of the accident in Japan.

The groups also questioned the safety of design features for the reactors and spent fuel pools, and their ability to withstand “severe earthquakes, tornadoes, plane crashes, or terrorist attacks.”

MEAG could not be reached Friday for a comment about how a delay might affect construction at Vogtle. The bonds sold for the nuclear project received ratings of Baa2 and A2 from Moody’s, and A-minus and A-plus from Fitch Ratings and Standard & Poor’s.

Trading in 2010A BABs due in 2057 has been active since they were issued. The bonds late last week were selling for about 94 cents on the dollar to yield just over 7.00%.

MEAG’s bonds have redemption provisions with full cost recovery should the project be delayed or cancelled.



Upcoming Events

Already a subscriber? Log in here
Please note you must now log in with your email address and password.