By Matt Tomsic
Published Jan. 11, 2012
Some $5 billion worth of bonds were downgraded to AA- from AA, with a stable outlook. The downgrade includes bonds that are planned for sale this month.
In 2009, the ratings agencies said they would take a critical look at utilities building nuclear facilities, said Mollie Gore, a spokeswoman for Santee Cooper.
“We’re certainly not the first,” Gore said.
Since 1968, Moody’s Investor Service, another ratings agency, has downgraded nearly 50 public utilities because of concerns about their nuclear reactor projects.
In 2010, Moody’s downgraded Atlanta-based utilities Southern Co. and Oglethorpe Power Corp. for similar reasons. Moody’s cited costs associated with Oglethorpe’s 30% participation in a nuclear power plant expansion in Georgia.
In its rating of Santee Cooper, Fitch cited excess capacity, possible exposure to higher electric rates and a Florida utility’s decision not to purchase part of Santee Cooper’s share in two new nuclear reactors at V.C. Summer Nuclear Station in Jenkinsville.
Santee Cooper owns about 45% of the Summer project, which is expected to cost $1.84 billion during the next two years. S.C. Electric & Gas Co. Inc., which co-owns the two reactors, expects the first unit to start service in 2016 and the second unit in 2019.
Gore said Santee Cooper is still looking for a partner to take some of its ownership share.
The utility wants to get to about 20% ownership and is negotiating with Duke Energy Carolinas, which has signed a letter of intent to obtain part of Santee Cooper’s ownership.
“I think the important thing is that we are fully committed to this new nuclear project, and we do see this as a long-term gain for our customers and the state,” Gore said. “It’s an important expansion of our capacity.”
Gore said she doesn’t think the downgrade will have a big impact.
“We have a bond issue that we’re currently preparing, and I think that it will go out later this month,” she said. “We expect strong response.”
Gore also said Santee Cooper has as a strong rating compared with other utilities, and Fitch recognized the strength of the utility’s executive team.
Fitch said it found management “has a good track record of adapting to changing electric industry conditions by adjusting power supply strategy, planning for rate increases and setting reasonable financial targets.” But Fitch noted that investors face more uncertainty given issues Santee Cooper faces during the next few years.
“The fundamentals are still in place,” Gore said. “This is just a reaction to us entering the next phase of this new nuclear project.”