Moody's: Market conditions masking US nuclear plant reliability issues

Although the majority of nuclear power plants have performed well, there have recently been some serious unplanned outages, most notably affecting investor-owned utilities such as Progress Energy Florida and Southern California Edison, but also the public power system Omaha Public Power District.

Incidents can be expected to become more frequent as the nuclear plants continue to age.

"As the country's nuclear fleet becomes older and plant lives are extended 20 years beyond their original life-spans, plant reliability issues could become more common and costly," says Michael Haggarty, a Moody's Senior Vice President. "Although the original 40-year nuclear operating licenses were granted for reasons other than nuclear technology limitations, some parts of the plants may have been engineered on the basis of an expected 40-year service life and will need to be upgraded."

So far, a combination of low natural gas prices and reduced demand for electricity, because of the slow economy, have softened the financial impact of the outages on the utilities.

As economic conditions improve and should natural gas prices increase from extremely low levels, nuclear outages will have a more significant impact on utility cash flows and cost recovery prospects, says Haggarty.

The utilities most exposed to the cost of outages are single asset operators of nuclear power plants, which run risks from their exposure to one asset and also do not benefit from the breadth of experience and economies of scale that characterize multi-unit operators.

For more information, Moody's research subscribers can access the report at http://www.moodys.com/research/US-Utilities-Low-Gas-Prices-and-Weak-Demand-are-Masking--PBC_146663.

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Michael G. Haggarty Senior Vice President Infrastructure Finance Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653William L. Hess MD - Utilities Infrastructure Finance JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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