Fitch Ratings assigns an underlying long-term rating of
'A' to Oglethorpe Power Corporation's (OPC) $200 million first
mortgage bonds (FMBs), series 2006. Fitch also assigns an underlying
'A' rating to $370 million of series 2006 tax-exempt pollution control
bonds (PCRBs) issued for the benefit of OPC through the Development
Authority of Burke County and the Development Authority of Monroe
County. The first mortgage bonds and the pollution control bonds are
senior secured lien obligations of OPC. The Rating Outlook is Stable.
In addition, Fitch affirms $900 million outstanding pollution control
bonds issued for the benefit of OPC by various development
authorities.
OPC's FMBs are taxable fixed-rate bonds and are being issued primarily to fund environmental expenditures. The taxable series 2006 bonds are scheduled to price the week of Oct. 2, 2005 with Goldman Sachs as lead manager. Depending on market conditions the size of the transaction may vary. OPC expects 2006 bonds to be insured by Ambac, and carry a 'AAA' rating by Fitch.
The pollution control bonds are being issued to refinance existing pollution control bonds and to restructure OPC's debt to better match its principal amortization with its asset deprecation. This re-amortization of OPC debt was made possible in connection with the recent extension of its member wholesale power contracts to 2050 from 2025. The pollution control bonds will be issued the week of Oct. 16, 2006 with JP Morgan as lead manager. A portion of the pollution control bonds will be issued as variable-rate demand bonds (VRDBs) and the remaining as auction rate notes (ARNs). The VRDBs include the Development Authority of Burke County series 2006A, 2006B-1, 2006B-2, 2006B-3, and 2006B-4, and the Development Authority of Monroe County series 2006A. The VRDBs will be supported by separate liquidity facilities provided by Rabobank and by separate bond insurance policies provided by Ambac. The rating of the VRDBs will be summarized in a separate press release. The ARNs include the Development Authority of Burke County series 2006C-1 and 2006C-2, and the Development Authority of Monroe County series 2006B. OPC expects the 2006 ARNs to be insured by Ambac and carry a 'AAA' rating by Fitch.
Earlier this year, Fitch cited the need for OPC's debt restructuring to maintain a reasonable level of debt amortization. While the debt restructuring produces an amortization that is consistent with the useful life of its assets (and depreciation schedule), Fitch notes the aggregate restructuring extends the average life of OPC's debt and increases its already heavy debt burden over a longer period of time. Fitch believes this type of leverage is reflected in the 'A' rating.
Listed below are key credit strengths, concerns and drivers for OPC's underlying rating. For additional details, please see the full credit report available on the Fitch Ratings web site at www.fitchratings.com dated May 3, 2006 and an updated report to be available the week of Sept. 11, 2006.
Credit strengths include:
-- Take-or-pay contracts with its members through 2050.
-- Well-developed management practices.
-- Diversified and reliable power supply portfolio.
-- Solid financial profile.
The primary credit concern for OPC includes the need for OPC's members to develop additional power supply to replace the existing supplemental arrangements that expire between 2010 and 2017 (assuming no contract extension elections are made). Since 1997, OPC members have had primary responsibility for their incremental power supply needs above existing OPC resources (approximately 30% in 2005, increasing to 50% by 2012). The members are currently exploring several ownership and long-term purchase opportunities for additional base load generation.
One project involves the development of additional nuclear generating units by OPC on behalf of its members. Last year, OPC and the other three co-owners of the existing two Voglte nuclear units executed a joint agreement to explore the development of two additional nuclear units on the site. The Voglte co-owners recently filed for an Early Site Permit with the Nuclear Regulatory Commission (NRC; an initial step in NRC's new approval process for new nuclear units). OPC currently has the ability to take up to 30% of the two additional proposed units and has until April 2008 to reduce its participation. The preliminary estimate of its 30% share is $1.8 billion, including interest during construction. The development of this and other projects is an important component of OPC's credit profile and Fitch will carefully monitor their development and scope of risk.
With nearly $1.2 billion of annual revenues, $5 billion of assets, and 24.7 million megawatt (mwh) sales in 2005, OPC is the largest wholesale electric cooperative in the nation serving a portion of the power supply needs to 38 Georgia electric distribution cooperatives. In aggregate, the distribution members serve over 1.6 million customers or a population of approximately 3.7 million with residential and commercial industrial customers comprising 68% and 23%, respectively, of member revenues. 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).
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.
OPC's FMBs are taxable fixed-rate bonds and are being issued primarily to fund environmental expenditures. The taxable series 2006 bonds are scheduled to price the week of Oct. 2, 2005 with Goldman Sachs as lead manager. Depending on market conditions the size of the transaction may vary. OPC expects 2006 bonds to be insured by Ambac, and carry a 'AAA' rating by Fitch.
The pollution control bonds are being issued to refinance existing pollution control bonds and to restructure OPC's debt to better match its principal amortization with its asset deprecation. This re-amortization of OPC debt was made possible in connection with the recent extension of its member wholesale power contracts to 2050 from 2025. The pollution control bonds will be issued the week of Oct. 16, 2006 with JP Morgan as lead manager. A portion of the pollution control bonds will be issued as variable-rate demand bonds (VRDBs) and the remaining as auction rate notes (ARNs). The VRDBs include the Development Authority of Burke County series 2006A, 2006B-1, 2006B-2, 2006B-3, and 2006B-4, and the Development Authority of Monroe County series 2006A. The VRDBs will be supported by separate liquidity facilities provided by Rabobank and by separate bond insurance policies provided by Ambac. The rating of the VRDBs will be summarized in a separate press release. The ARNs include the Development Authority of Burke County series 2006C-1 and 2006C-2, and the Development Authority of Monroe County series 2006B. OPC expects the 2006 ARNs to be insured by Ambac and carry a 'AAA' rating by Fitch.
Earlier this year, Fitch cited the need for OPC's debt restructuring to maintain a reasonable level of debt amortization. While the debt restructuring produces an amortization that is consistent with the useful life of its assets (and depreciation schedule), Fitch notes the aggregate restructuring extends the average life of OPC's debt and increases its already heavy debt burden over a longer period of time. Fitch believes this type of leverage is reflected in the 'A' rating.
Listed below are key credit strengths, concerns and drivers for OPC's underlying rating. For additional details, please see the full credit report available on the Fitch Ratings web site at www.fitchratings.com dated May 3, 2006 and an updated report to be available the week of Sept. 11, 2006.
Credit strengths include:
-- Take-or-pay contracts with its members through 2050.
-- Well-developed management practices.
-- Diversified and reliable power supply portfolio.
-- Solid financial profile.
The primary credit concern for OPC includes the need for OPC's members to develop additional power supply to replace the existing supplemental arrangements that expire between 2010 and 2017 (assuming no contract extension elections are made). Since 1997, OPC members have had primary responsibility for their incremental power supply needs above existing OPC resources (approximately 30% in 2005, increasing to 50% by 2012). The members are currently exploring several ownership and long-term purchase opportunities for additional base load generation.
One project involves the development of additional nuclear generating units by OPC on behalf of its members. Last year, OPC and the other three co-owners of the existing two Voglte nuclear units executed a joint agreement to explore the development of two additional nuclear units on the site. The Voglte co-owners recently filed for an Early Site Permit with the Nuclear Regulatory Commission (NRC; an initial step in NRC's new approval process for new nuclear units). OPC currently has the ability to take up to 30% of the two additional proposed units and has until April 2008 to reduce its participation. The preliminary estimate of its 30% share is $1.8 billion, including interest during construction. The development of this and other projects is an important component of OPC's credit profile and Fitch will carefully monitor their development and scope of risk.
With nearly $1.2 billion of annual revenues, $5 billion of assets, and 24.7 million megawatt (mwh) sales in 2005, OPC is the largest wholesale electric cooperative in the nation serving a portion of the power supply needs to 38 Georgia electric distribution cooperatives. In aggregate, the distribution members serve over 1.6 million customers or a population of approximately 3.7 million with residential and commercial industrial customers comprising 68% and 23%, respectively, of member revenues. 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).
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.