Municipal Electric Authority of Georgia's Project One Series HH & General Resolution Projects Series 2018A Bonds Rating

NEW YORK (S&P Global Ratings) Dec. 7, 2018--S&P Global Ratings has assigned 
its 'A' rating to the Municipal Electric Authority of Georgia (MEAG) Project 
One senior-lien bonds (series HH). S&P Global Ratings assigned its 'A' rating 
to MEAG's General Resolution Projects senior-lien bonds (series 2018A). As 
well, S&P Global Ratings affirmed its ratings on respective parity 
obligations, as well as its 'A-' rating on subordinate-lien obligations for 
these projects. The outlook is negative.

In addition, S&P Global Ratings affirmed the following ratings, with negative 
outlooks:
  • The 'A' rating on MEAG's Vogtle Units 3 and 4 Project M (which reflects the credit strength of the MEAG participants) and Project J (which we rate on the basis of the weak-link in credit quality between MEAG and JEA, a Florida utility; we view MEAG's as the weak link).
  • The 'BBB+' rating on MEAG's Vogtle Units 3 and 4 Project P, (which is rated on the basis of the weak-link in credit quality between MEAG and PowerSouth Energy Cooperative; we view PowerSouth as the weak link); and,
  • The 'A-' rating on MEAG's Combined Cycle project (senior-lien).
Finally, we have affirmed the ratings on three issues that apply to 
MEAG-issued subordinate-lien debt, under our joint-support criteria, which 
provides enhancement to MEAG's stand-alone credit: the 'AA/A-1' rating 
reflects joint support from Barclays Bank; the 'AA/A-1' rating reflects joint 
support from Bank of Tokyo Mitsubishi; and the 'AA/A-1+' rating reflects joint 
support from The Toronto-Dominion Bank.

On Sept. 28, 2018, we lowered our unenhanced ratings on all MEAG projects, 
reflecting our view of the cumulative effect of the numerous delays and cost 
overruns related to the construction of the Vogtle nuclear units 3 and 4, as 
well as the co-owners' decision to amend the project's joint ownership 
agreement. In our opinion, the several and material budget adjustments 
underscore the uncertain magnitude of the authority's ultimate exposure to 
Vogtle project costs. We believe significant risks continue to challenge the 
Vogtle project, and additional overruns or project delays are possible. We 
also believe that the litany of budget adjustments raises questions about 
project stewardship on the part of MEAG and the other project co-owners. 
Furthermore, we take the view that the risks associated with the Vogtle 
project could have a spill-over effect on MEAG's other projects because of the 
general commonality of participants. 

"We believe, as our negative outlook reflects an uncertain financial, 
operational, legal, and political climate surrounding the Vogtle 3 and 4 
project," said S&P Global Ratings credit analyst Jeff Panger. Of paramount 
risk is JEA's attempt to invalidate its power purchase agreement (PPA) with 
MEAG. Importantly, JEA continues to make regularly scheduled payments to MEAG 
supporting the Project J obligations, and this forestalls, at this time, 
further rating action affecting both MEAG and JEA. 

Proceeds from the Project One series HH and General Resolution Projects series 
2018A bonds will largely refund commercial paper and lines of credit draws on 
the respective projects.

MEAG's broad base of 49 members, with about 310,000 end use customers, covers 
a geographically diverse area of Georgia. We view the authority's members as 
providing credit stability, with credit profiles that, on balance, support the 
ratings.

We could revise the outlook to stable if there is greater certainty regarding 
Vogtle project costs, (that we view as manageable and do not erode financial 
performance), and if uncertainty regarding cost recovery related to the JEA 
suit is resolved.

We could lower the rating if there are significant further construction delays 
or cost overruns. Furthermore, we could lower our rating on MEAG if the 
financial burdens related to the nuclear construction projects erode the 
utility's financial metrics, or significantly increase member retail rates, 
causing us to reevaluate the ability of MEAG's members to shoulder additional 
costs. Finally, if JEA is successful in its litigation (or it were to cease 
making payments in support of its Project J obligation), we would lower our 
rating on MEAG's Project J bonds multiple notches. In this scenario, we could 
also downgrade MEAG's other project debt multiple notches, though we 
anticipate this would be less severe.