Fitch Ratings affirms the 'A' rating to Oglethorpe Power
Corporation's (OPC) $1 billion outstanding pollution control bonds
issued through various Georgia Development Authorities (Appling
County, Burke County, Heard County, and Monroe County). The Rating
Outlook is Stable. OPC's pollution control bonds represent a senior
secured lien. Fitch also affirms the 'A' rating on the outstanding
debt of OPC Scherer 1997 Funding Corp., whose debt service is secured
from rental payments from OPC and a pledge of ownership interest in
the coal based unit.
With nearly $1.2 billion of annual revenues, $5 billion of assets and 24.7 million mwh sales in 2005, OPC is the largest wholesale electric cooperative in the nation. OPC has maintained an 'A' rating and Stable Rating Outlook since the restructuring in 1997 which established OPC as a generation only company (having sold its transmission assets to the Georgia Transmission Corporation, currently rated 'AA-' by Fitch).
Supporting OPC's credit is its take-or-pay contracts with its members and well developed management practices. Illustrating positive member support and the long-term value of OPC's existing baseload assets, all members recently signed new contracts that extended their involvement with OPC to 2050 from 2025. Other positive credit support derives from a diversified and reliable power supply portfolio and solid financial profile. In 2005, OPC's energy was derived primarily from coal (49%) and nuclear (42%) generation units. OPC and its members competitive profile is also enhanced by the absence of any action regarding deregulation in Georgia.
Credit concerns include the relatively large role of non-OPC purchases by members to meet their incremental power supply needs. Fitch has reviewed these power supply arrangements and believes the market and counterparty exposures are partially mitigated by the members' and OPC's financial resources (For more details, see the press release dated Oct. 18, 2004 on the Fitch Ratings web site at www.fitchratings.com). In addition, Fitch recognizes the members' long-term need for power supply after the expiration of their existing supplemental contracts.
Going forward, key credit drivers for OPC include:
-- Maintenance of solid financial position. Over the past few years, OPC has generated debt service coverage around 1.1x, consistent with its planning and the not-for-profit nature of a wholesale cooperative. In addition, OPC has maintained a strong liquidity profile through substantial cash reserves, lines of credit and a flexible rate structure. This is particularly meaningful, especially given the relatively stable nature of its fuel exposure. Currently, OPC has $180 million in cash, including $86 million in prepaid debt service to the federal government, and $100 million in committed liquidity facilities and $300 million in available capacity in its commercial paper program. Fitch also views positively OPC's wholesale rate structure that adjusts rates as often as necessary to meet changing costs.
-- Maintenance of steady amortization of its debt. With its large investment in capital intensive baseload assets, OPC has always had significant leverage on its balance sheet. To its credit, OPC has steadily paid down its debt over time improving its equity position to 12% of capitalization, consistent with other 'A' rated wholesale providers. To better match the useful life of its assets (which extend to 2050) and its current principal repayment schedule, OPC is currently exploring the extension of maturities on a portion of its debt. While the exact nature of this restructuring is not final, Fitch looks for OPC to continue to amortize its debt at reasonable levels over the intermediate term.
-- Planning for additional generation. OPC is exploring adding baseload generating units on behalf of its members. As part of this plan, OPC and the other existing co-owners of the Voglte nuclear unit executed a joint agreement to explore development of up to two additional units at the Voglte site. OPC currently maintains its ability to take up to 30% of any new project. The extent of OPCs ultimate involvement in the new project, if any, will not be determined for two-to-four years. Management estimates that the earliest on line date for a new nuclear unit would be around 2015. Although adding a nuclear unit would diversify OPC's fuel mix and could help meet its members' growing power supply needs, the construction, technological and operational risk of this project could be meaningful.
OPC provides electricity to 38 Georgia electric distribution cooperatives. In aggregate, the distribution members serve over 1.5 million customers or a population of approximately 3.7 million with residential and commercial industrial customers comprising 71% and 26% respectively of member revenues.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
With nearly $1.2 billion of annual revenues, $5 billion of assets and 24.7 million mwh sales in 2005, OPC is the largest wholesale electric cooperative in the nation. OPC has maintained an 'A' rating and Stable Rating Outlook since the restructuring in 1997 which established OPC as a generation only company (having sold its transmission assets to the Georgia Transmission Corporation, currently rated 'AA-' by Fitch).
Supporting OPC's credit is its take-or-pay contracts with its members and well developed management practices. Illustrating positive member support and the long-term value of OPC's existing baseload assets, all members recently signed new contracts that extended their involvement with OPC to 2050 from 2025. Other positive credit support derives from a diversified and reliable power supply portfolio and solid financial profile. In 2005, OPC's energy was derived primarily from coal (49%) and nuclear (42%) generation units. OPC and its members competitive profile is also enhanced by the absence of any action regarding deregulation in Georgia.
Credit concerns include the relatively large role of non-OPC purchases by members to meet their incremental power supply needs. Fitch has reviewed these power supply arrangements and believes the market and counterparty exposures are partially mitigated by the members' and OPC's financial resources (For more details, see the press release dated Oct. 18, 2004 on the Fitch Ratings web site at www.fitchratings.com). In addition, Fitch recognizes the members' long-term need for power supply after the expiration of their existing supplemental contracts.
Going forward, key credit drivers for OPC include:
-- Maintenance of solid financial position. Over the past few years, OPC has generated debt service coverage around 1.1x, consistent with its planning and the not-for-profit nature of a wholesale cooperative. In addition, OPC has maintained a strong liquidity profile through substantial cash reserves, lines of credit and a flexible rate structure. This is particularly meaningful, especially given the relatively stable nature of its fuel exposure. Currently, OPC has $180 million in cash, including $86 million in prepaid debt service to the federal government, and $100 million in committed liquidity facilities and $300 million in available capacity in its commercial paper program. Fitch also views positively OPC's wholesale rate structure that adjusts rates as often as necessary to meet changing costs.
-- Maintenance of steady amortization of its debt. With its large investment in capital intensive baseload assets, OPC has always had significant leverage on its balance sheet. To its credit, OPC has steadily paid down its debt over time improving its equity position to 12% of capitalization, consistent with other 'A' rated wholesale providers. To better match the useful life of its assets (which extend to 2050) and its current principal repayment schedule, OPC is currently exploring the extension of maturities on a portion of its debt. While the exact nature of this restructuring is not final, Fitch looks for OPC to continue to amortize its debt at reasonable levels over the intermediate term.
-- Planning for additional generation. OPC is exploring adding baseload generating units on behalf of its members. As part of this plan, OPC and the other existing co-owners of the Voglte nuclear unit executed a joint agreement to explore development of up to two additional units at the Voglte site. OPC currently maintains its ability to take up to 30% of any new project. The extent of OPCs ultimate involvement in the new project, if any, will not be determined for two-to-four years. Management estimates that the earliest on line date for a new nuclear unit would be around 2015. Although adding a nuclear unit would diversify OPC's fuel mix and could help meet its members' growing power supply needs, the construction, technological and operational risk of this project could be meaningful.
OPC provides electricity to 38 Georgia electric distribution cooperatives. In aggregate, the distribution members serve over 1.5 million customers or a population of approximately 3.7 million with residential and commercial industrial customers comprising 71% and 26% respectively of member revenues.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.