Power Engineering - Moody's sees stable outlook for U.S. nuclear power

New York, March 9, 2004 -- Nuclear power operators in the U.S. have a stable rating outlook, Moody's Investors Service says, as they continue to improve the operating performance of their plants and offer cost competitive electricity.

Moody's also says the movement to concentrate plant ownership among fewer companies is a positive for the industry, as is the wave of plant operating license extensions that are either being granted or applied for.

"Over the past 10 - 15 years there has been a noticeable upswing in nuclear power plant operating performance in the United States," says Moody's Vice President/Senior Analyst Kevin Rose, author of a new report on US nuclear power. "This has been supportive of the credit quality of the large owners of nuclear generating fleets."

"We note that the trend of improved performance has gone in parallel with the consolidation of ownership of nuclear plants in the US. For the most part, the higher degree of expertise that these operators posses lends itself to fewer and less serious operating problems, which are usually short in duration," says Rose.

Moody's generally views the movement towards concentrated ownership as supportive to credit quality because, first, it leads to companies with larger technical staffs and therefore greater expertise; second, it spreads shared knowledge across multiple plants; and, third, ownership of multiple plants reduces the impact, should there be a plant outage.

Moody's says that because NEI statistics show the average total running costs for nuclear power were about 2.2 cents per kWh in 2002, and performance continues to rise, nuclear power should continue to compete well against almost any form of power with perhaps the exception of hydro, which has no fuel costs.

"Existing nuclear plant owners, many state regulators, and the Nuclear Regulatory Commission appear to view the extension of nuclear power plant licenses as a viable low-cost alternative to the construction of fossil-fueled capacity," says Rose. He notes that the high capital costs of the nuclear plants pursuing license extension will have been largely depreciated and recovered through utility rate base during the initial 40-year license term.

Electric utilities that should choose to build new nuclear plants, however, could be challenged to maintain their creditworthiness, Moody's says in a separate report published at the end of last year. The NRC's approval of new designs, however, will undoubtedly lower capital costs for this construction. Prospects for investment in new nuclear plants, according to Moody's Senior Vice President Mo Ying Seto, will be influenced by the pace at which a permanent waste disposal facility is developed and completed.

Any new construction of plants is years away. Meanwhile, 23 nuclear units in the US have received NRC approval to operate for 20 years beyond their original expiration date, while 33 more have either filed for such approval or have stated their intention to do so.

Moody's will assess each strategy for extending the license life of a plant on its own merits.

"If the nuclear plant owners can continue to maintain the favorable track record with respect to capacity factors, energy output, economics, and other measures of plant performance, then credit quality for those entities should not be adversely affected by the costs of extending the plant's license life," says Rose.

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