OREANDA-NEWS. Fitch Ratings has assigned the following ratings to the Municipal Electric Authority of Georgia's (MEAG Power or the authority) Plant Vogtle Units 3&4 Project Bonds:

--\\$183.76 million Project J, series 2015A 'A+';
--\\$69.405 million Project P, series 2015A 'A-'.

The bonds are expected to sell via a negotiated sale on Aug. 11, 2015. Proceeds of each series will be used to finance costs associated with MEAG's Projects P and J related to the construction of Vogtle nuclear expansion project.

In addition, Fitch affirms the ratings on the following outstanding MEAG Power bonds:

--\\$1,248.4 million Project J Bonds at 'A+';
--\\$390.5 million Project P Bonds at 'A-';
--\\$1,028.9 million Project M bonds at 'A+';
--\\$2.267 billion Project One power revenue and subordinated bonds at 'A+';
--\\$945.411 million General Resolution Projects general revenue and subordinated bonds at 'A+';
--\\$210.367 million combined cycle project revenue bonds at 'A+'.

The Rating Outlook on all proposed and outstanding Project J, Project M, Project One, General Resolution and Combined Cycle Project bonds is revised to Negative from Stable.

The Rating Outlook on all proposed and outstanding Project P bonds is Stable.

SECURITY

The Project J bonds are secured by the net revenues of MEAG Power's Project J, including payments received under a power purchase agreement with JEA, FL (JEA; 'AA'/Stable Outlook) and power sales contracts with the participating cities.

The Project P bonds are secured by the net revenues of MEAG Power's Project P, including payments received under a power purchase agreement with PowerSouth Energy Cooperative (PowerSouth, 'A-'/Stable Outlook) and power sales contracts with the participating cities.

The remaining bonds are secured by revenues received by MEAG Power attributable to each individual project, including payments pursuant to power sales contracts with respective project participants.

KEY RATING DRIVERS

OUTLOOK NEGATIVE ON NUCLEAR CONCERNS: The Outlook revision to Negative for certain of MEAG Power's bonds reflects Fitch's concern that additional construction delays and/or cost overruns related to the Vogtle project could result in future rate pressures, which ultimately lead to an erosion in financial metrics, the competitiveness of MEAG's power supply and the credit quality of the participating cities. Challenges to date have already driven project costs from \\$3.5 to \\$4.2 billion and in-service dates from 2016/2017 to 2019/2020.

VOGTLE PROJECT RATINGS: The ratings on the Project J and P bonds reflect the credit quality of the participating MEAG Power participants, as well as obligations of JEA and PowerSouth, respectively, to pay debt service on those respective bonds for the first 20 years. The rating Outlook on the Project P bonds remains Stable as the lower rating captures additional risk.

STRONG POWER AGENCY FUNDAMENTALS: Each of MEAG Power's individual projects and ratings is supported by the authority's strong credit fundamentals, including a diverse mix of generating resources, sound financial performance, competitive wholesale and retail rates, and strong court-validated power sales contracts with the project participants.

RATINGS UNIFORM DESPITE OBLIGATIONS: The 49 city- and county-owned electric systems that participate in MEAG Power's various projects exhibit solid diversity and creditworthiness. Fitch maintains uniform ratings on the MEAG Power projects despite entitlement shares and varying payment provisions upon participant default reflecting consolidated billing procedures and required reserves.

SIZABLE ACCUMULATED TRUST FUNDS: The availability of funds held in the Municipal Competitive Trust (MCT, \\$661.2 million at June 30, 2014) mitigates the impact of the planned expenditures on the authority and its participants. The funds have been accumulated over time and may be used by the participants to reduce current power costs, or redeployed to address future generation costs, including those related to the Vogtle expansion.

DEBT REQUIREMENTS PRE-FUNDED: MEAG Power's strategy of pre-funding capital requirements for the Vogtle expansion further mitigates funding risk. The proposed Project J and P financings, together with committed funding from the Department of Energy (DOE) loan guarantee program, should be sufficient to finance the currently expected remaining construction costs. An additional \\$400 million of funding is also available for contingencies.

RATING SENSITIVITIES

ADVERSE NUCLEAR DEVELOPMENTS: Further adverse developments related to the development of the Vogtle Nuclear Units 3 and 4 including sizable cost overruns and extensive delays that result in rate pressures and ultimately lead to erosion in financial metrics, the competitiveness of Municipal Electric Authority of Georgia's power supply and the credit quality of the participating cities could result in a downgrade. Evidence that the Vogtle expansion project is likely to be completed within the current time and cost parameters could stabilize the Outlook.
POWER PURCHASER RATING CHANGES: Changes in the ratings of power purchasers JEA, FL and PowerSouth Energy Cooperative could result in corresponding rating changes to the Project J and P bonds.

CREDIT PROFILE

NUCLEAR CHALLENGES PERSIST

The Outlook revision to Negative for nearly all of MEAG Power's outstanding debt is rooted in the increasing uncertainty related to the Vogtle expansion project, particularly the final cost and associated in-service date. Although the project has been subject to challenges from its inception, Fitch's ratings have considered the size and scope of the project and reflected expectations that reasonable cost overruns and delays were likely, but could be managed at the prevailing rating level.

The latest challenges, however, have increased the risk that further cost overruns and/or delays could eventually result in financial pressures that are no longer consistent with the current rating category.
The Vogtle project's latest Integrated Project Schedule (IPS), reflected a new forecast for completion that would incrementally delay the previously estimated in-service dates by 18 months (from the fourth quarter of 2017 (4Q17) to the 2Q19 for Vogtle Unit No. 3 and from 4Q18 to 2Q20 for Vogtle Unit No. 4) as the result of the contractor's inability to overcome certain identified schedule challenges. The authority expects that the additional delay will increase the estimated in-service cost from an estimated \\$3.9 billion to approximately \\$4.2 billion and increase total financing needs to \\$4.5 billion.

MEAG Power believes that, pursuant to the engineering, procurement and construction (EPC) Contract, the contractor is responsible for the costs related to the delay and that the co-owners are entitled to recover liquidated damages for the contractor's delay. These claims, and others, are likely to be resolved through dispute resolution procedures under the EPC Contract, or through on-going litigation.

Although the latest delays and incremental costs are unlikely to dramatically alter the Vogtle project's fundamental post-completion economics, and the related burdens placed on the participants, Fitch believes that likelihood for future challenges has increased based on the performance to date.

VOGTLE INTEREST STRUCTURED AS THREE PROJECTS

MEAG Power has subscribed to an ownership interest of 22.7% in the Vogtle expansion project - consistent with its participation in Units 1 and 2 - or approximately 500.3 megawatts (MW) of capacity. However, the capacity attributable to MEAG Power's ownership interest is initially in excess of its participants' needs. As a result, the authority has structured its ownership interest in the new Vogtle units as three separate projects - Projects J (206 MW), M (169 MW) and P (125 MW) - to allow for a portion of the initial capacity to be purchased by entities other than the MEAG Power participants.
Agreements are currently in place with JEA and PowerSouth, wherein each of the utilities has agreed to purchase all of the output from, respectively, Projects J and P, for the first 20 years of commercial operation pursuant to take-or-pay PPAs. Upon the expiration of the PPAs the output of each project will be purchased by the designated MEAG Power participants.
All of the capacity allocated to Project M will be purchased by 29 participating members of MEAG Power.

MULTI-PROJECT JOINT-ACTION AGENCY

MEAG Power is a joint-action agency created to provide bulk electric power to municipally-owned electric distribution systems located throughout the state of Georgia. The authority effectively supplies the full energy requirements of 49 systems via participation in a series of power supply projects. The participating systems, in turn, provide electric service to approximately 308,000 retail customers, representing a total population of 614,000.