TEXT-Moody's release on nuclear power projects

(The following statement was released by the rating agency)

June 26 - Public power electric utilities in the U.S. face the challenge of determining whether to participate in proposed new nuclear power generation projects, a decision that could affect credit quality, according to a newly released report from Moody's Investors Service.

"At least three Moody's rated public power utilities are actively exploring participation in new nuclear generation projects," said Moody's Assistant Vice President Joshua Schaff, who co-authored the report with Senior Vice President Dan Aschenbach.

"Environmental concerns about greenhouse gas emissions, uncertainties about future natural gas prices and supply, as well as broader policy concerns about U.S. dependence on imported oil, have all been factors that are causing renewed interest in new nuclear generation projects."

Moody's reported that there are risks to adding new nuclear generation capacity for public power utilities that could potentially affect credit. These include potential for construction cost overruns; negative public reaction to potential safety and security problems at nuclear plants; lack of experience with new plant designs; and a lack of a long-term federal solution for storage of radioactive waste, thus leading to long term cost uncertainty.

On the positive side, Moody's reported that in some cases, nuclear generation can strengthen a public power utility's credit profile by providing fuel diversity and a lower marginal cost of electricity production. Nuclear fuel has been consistently among the least expensive non-renewable fuels used for power generation in the U.S.

In addition, over the past decade, U.S. nuclear plants have posted a strong operating record. "Significant improvement in plant operating efficiency, including a reduction in the amount of time plants are off-line for maintenance and refueling, has increased output.

Overall, plant capacity factors and net electric generation have recently trended upward at nuclear facilities in the United States," said Mr. Schaff. Moody's noted that there are considerable negative pressures on the economics of nuclear plants, the foremost being the price of construction. Several coal-fired plants currently under construction have experienced significant price inflation because of increases in materials costs.

Similar cost increases for nuclear plants were common during the last construction cycle and were compounded by public and legal opposition to their construction, which resulted in delays.