CHICAGO — The Omaha Public Power District, which runs Nebraska's Fort Calhoun nuclear plant, is responding to the current flooding crisis as one would expect from the fourth-highest rated utility in the United States, credit analysts say.
The flood threat comes as the Missouri River hits record levels and is expected to crest near the end of June. In response to the flooding, the OPPD June 6 declared notification of an unusual event, the lowest of four standard emergency levels. Since then, utility officials and U.S. nuclear regulators have repeatedly said projected flood levels will not endanger the plant.
The Cooper Nuclear Station, the state's other nuclear plant, faces its own threats from the flooding, though it is located in a somewhat more favorable position on the Missouri River banks. Its operator, the Nebraska Public Power District, has also issued an unusual event notification due to the flood.
Outside of flood protection expenses, such as erecting berms and keeping staff on duty, the biggest cost to both utilities if forced into an extended shutdown would come from having to buy power on the open market.
The OPPD was fortunate, analysts said, because its nuclear plant was already in shutdown mode — part of a regularly scheduled outage for maintenance and fueling — when the flooding began. The utility has since extended the outage until waters recede.
As well, the OPPD had recently upgraded their flood protection programs at the plant in response to a so-called yellow finding issued by the Nuclear Regulatory Commission last fall. The finding cited the utility for failing to maintain proper procedures for handling an external flood.
OPPD officials have also talked regularly with analysts, posted frequent updates on their website, and released information for bond investors about the flood risks to the nuclear plant and its nearby coal plant, analysts said.
"This is why they're a Aa1-rated credit," John Medina, a public power analyst with Moody's Investors Service who covers the OPPD, said in a telephone interview. "These are the types of things you expect from a highly rated entity: advanced planning, having replacement contracts in place, anticipating that something could go wrong, and having a plan to address it."
Standard & Poor's, which assigns a AA to the utility, says the credit is cushioned by strong cash and reserves that will allow it to handle the crisis without too much fiscal damage.
"The situation is serious, but we believe the district is capable of managing the extra costs due to the flooding and associated shutdown of facilities," analyst Jeffery Panger wrote in a recent release on the flood's impact on the OPPD's credit quality. "Extended outages are likely to impose substantial but manageable cost to the utility."
To cover the costs, the OPPD will likely tap its cash reserves and perhaps a $100 million credit line. It expects some reimbursement from the Federal Emergency Management Agency, but expects to recover most of the expenses through its so-called fuel and purchased power adjustment, or FPPA, mechanism, which allows it to pass costs through to its customers.
The OPPD has more than $160 million of cash, in addition to a $32 million rate stabilization reserve fund, and a $38 million debt retirement reserve fund, according to Standard & Poor's.
Separately, the plant suffered a fire in an electrical switch room that knocked out power to a system that cools spent nuclear fuel. The system was restored within 90 minutes — it would have taken 88 hours for radioactive materials to be released, according to Standard & Poor's.
The fire and temporary outage has sparked a flood of rumors about the plant suffering major radioactive leaks. "The rumors have been as difficult to combat as the rising floodwaters," Victor Dricks, spokesman for the Nuclear Regulatory Commission, wrote in a June 17 blog post.
The OPPD entered the market in early June, just days before it issued an unusual event notification from the flooding, with $143 million of revenue bonds. A piece of that debt with a 2015 maturity and 5% coupon was yielding 1.22% in June 9 trading, the most recent trading, according to the Municipal Securities Rulemaking Board. Bonds with a 2024 maturity and a 5% coupon were yielding 3.38% in early June trading.
Meanwhile, if the Cooper Nuclear Station is forced to shut down due to continued flooding, the utility could take a hit from having to purchase power on the open market.
"An unplanned shutdown means they're going to have to buy replacement power," Medina said. "But they have sufficient liquidity available to them to manage these additional costs."
