Municipal Electric Authority of Georgia
MEAG Proposes Additional $369M in Bonds for Vogtle Nuclear Facility Construction Amid Possible Tender of Ownership Interest in Nuclear Project
Thu 06/23/2022 15:42 PM
Relevant Documents:
Series 2022A Project J Bonds
Series 2022A Project M Bonds
Series 2022A and Series 2022B Project P Bonds
The Municipal Energy Authority of Georgia, or MEAG Power, is selling an aggregate $369 million in Series 2022 bonds to complete construction of Plant Vogtle Units 3 and 4, or the Vogtle Units, a two-unit nuclear project in Burke County, Georgia. Goldman Sachs is senior manager on the deal, which is scheduled to price on Tuesday, June 28.
MEAG Power is offering the debt in three separate transactions pursuant to the three special-purpose vehicles, or SPVs, which are named Project J, Project M and Project P, that it formed in order to own its share of Plant Vogtle. Through the SPVs, MEAG Power engages in power sales contracts. The chart below is a brief description of the offerings:
Project J represents 41% of MEAG Power’s Plant Vogtle interest. Project M represents 33.8% of MEAG Power’s interest, while Project P represents 24.9% of MEAG Power’s interest. Each project will receive revenue based on the sale of Plant Vogtle output to various municipalities and cooperatives.
Project J has power sale contracts with the Jacksonville Electric Authority, or JEA, of Jacksonville, Fla., as well as 39 municipalities in Georgia. Project M has contracts with 29 municipalities in Georgia, and Project P has power sale contracts with PowerSouth Energy Cooperative in Andalusia, Ala., and 39 municipalities in Georgia.
These are “take-or-pay” contracts that counterparties are obligated to pay regardless of the status of the plants, according to the road show. A June 2020 ruling by the U.S. District Court for the Northern District of Georgia in a dispute between the JEA and MEAG Power affirmed the “hell-or-high-water” nature of the contracts.
The Vogtle units were 97% complete as of March 31. MEAG Power, through its SPVs, owns 22.7% of the two units. Georgia Power Company, or GPC, owns 45.7%. Oglethorpe Power Corp, or OPC, owns 30%, and Dalton Utilities owns 1.6%. This ownership scheme requires GPC to shoulder a greater percentage of construction costs should those costs reach certain thresholds. Crossing that threshold means minority owners, such as MEAG Power, can tender their ownership interest to GPC.
These provisions are now subject to dispute, resulting in new litigation filed by MEAG Power on June 18 in the Superior Court of Fulton County, Georgia. (OPC has already decided to tender a portion of its ownership.) The heart of the matter is the threshold at which GPC must shoulder a greater portion of construction costs, which are set at $2.1 billion over a construction cost forecast from 2018. GPC says it believes that the starting construction cost forecast amount is $18.38 billion, while MEAG Power and OPC say they believe it is $17.2 billion. The parties also disagree on the extent to which Covid-19-related costs affect the cost-sharing and tender calculations.
GPC has the unilateral right to cancel construction of the two units. But if it does not exercise that right, it must accept the tender of the ownership interests. According to the road show, MEAG Power, as well as OPC and Dalton, have until Aug. 27 to tender their ownership interest.
The Vogtle units can each generate 1,102 megawatts of power once operational within the next six to eight months in the case of Unit 3 and 12 to 18 months in the case of Unit 4. The current construction budget of the Vogtle units is $20.5 billion, according to the road show.
MEAG Power generated $714 million in revenue in fiscal year 2021 and had $12.2 billion in assets and $8.8 billion in long-term debt. The initial cost estimate for MEAG Power’s share of the Vogtle units was $3.6 billion, and the updated cost estimate is $7.3 billion, partially offset by, among other things, $835 million in funding from Toshiba under the guarantee settlement agreement.
–Seth Brumby
Series 2022A Project J Bonds
Series 2022A Project M Bonds
Series 2022A and Series 2022B Project P Bonds
The Municipal Energy Authority of Georgia, or MEAG Power, is selling an aggregate $369 million in Series 2022 bonds to complete construction of Plant Vogtle Units 3 and 4, or the Vogtle Units, a two-unit nuclear project in Burke County, Georgia. Goldman Sachs is senior manager on the deal, which is scheduled to price on Tuesday, June 28.
MEAG Power is offering the debt in three separate transactions pursuant to the three special-purpose vehicles, or SPVs, which are named Project J, Project M and Project P, that it formed in order to own its share of Plant Vogtle. Through the SPVs, MEAG Power engages in power sales contracts. The chart below is a brief description of the offerings:
Project J represents 41% of MEAG Power’s Plant Vogtle interest. Project M represents 33.8% of MEAG Power’s interest, while Project P represents 24.9% of MEAG Power’s interest. Each project will receive revenue based on the sale of Plant Vogtle output to various municipalities and cooperatives.
Project J has power sale contracts with the Jacksonville Electric Authority, or JEA, of Jacksonville, Fla., as well as 39 municipalities in Georgia. Project M has contracts with 29 municipalities in Georgia, and Project P has power sale contracts with PowerSouth Energy Cooperative in Andalusia, Ala., and 39 municipalities in Georgia.
These are “take-or-pay” contracts that counterparties are obligated to pay regardless of the status of the plants, according to the road show. A June 2020 ruling by the U.S. District Court for the Northern District of Georgia in a dispute between the JEA and MEAG Power affirmed the “hell-or-high-water” nature of the contracts.
The Vogtle units were 97% complete as of March 31. MEAG Power, through its SPVs, owns 22.7% of the two units. Georgia Power Company, or GPC, owns 45.7%. Oglethorpe Power Corp, or OPC, owns 30%, and Dalton Utilities owns 1.6%. This ownership scheme requires GPC to shoulder a greater percentage of construction costs should those costs reach certain thresholds. Crossing that threshold means minority owners, such as MEAG Power, can tender their ownership interest to GPC.
These provisions are now subject to dispute, resulting in new litigation filed by MEAG Power on June 18 in the Superior Court of Fulton County, Georgia. (OPC has already decided to tender a portion of its ownership.) The heart of the matter is the threshold at which GPC must shoulder a greater portion of construction costs, which are set at $2.1 billion over a construction cost forecast from 2018. GPC says it believes that the starting construction cost forecast amount is $18.38 billion, while MEAG Power and OPC say they believe it is $17.2 billion. The parties also disagree on the extent to which Covid-19-related costs affect the cost-sharing and tender calculations.
GPC has the unilateral right to cancel construction of the two units. But if it does not exercise that right, it must accept the tender of the ownership interests. According to the road show, MEAG Power, as well as OPC and Dalton, have until Aug. 27 to tender their ownership interest.
The Vogtle units can each generate 1,102 megawatts of power once operational within the next six to eight months in the case of Unit 3 and 12 to 18 months in the case of Unit 4. The current construction budget of the Vogtle units is $20.5 billion, according to the road show.
MEAG Power generated $714 million in revenue in fiscal year 2021 and had $12.2 billion in assets and $8.8 billion in long-term debt. The initial cost estimate for MEAG Power’s share of the Vogtle units was $3.6 billion, and the updated cost estimate is $7.3 billion, partially offset by, among other things, $835 million in funding from Toshiba under the guarantee settlement agreement.
–Seth Brumby
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