New York, 9 July 2009

Moody's Investors Service is considering taking a more cautious view toward issuers that are actively pursuing new nuclear generation, says the rating agency in a new report, which outlines how political and policy conditions are spurring applications for new nuclear power generation for the first time in years.

"Once operating, nuclear plants are viewed favorably due to their economics and no-carbon emission footprint, but history gives us reason to be concerned about possible balance-sheet challenges, the lack of tangible current efforts to defend the existing ratings, and the substantial execution risk involved in building new nuclear power facilities," said Moody's Senior Vice President Jim Hempstead, lead author of the report. "Most nuclear-building utilities suffered ratings downgrades—sometimes by several notches—during that last major building cycle."

With only about 24 months remaining before the Nuclear Regulatory Commission (NRC) begins issuing licenses for new projects and major investment begins, he said, few of the issuers currently rated by Moody's have taken any meaningful steps to strengthen their balance sheets.

"Because consideration of these new projects tend to raise an issuer's business and operating risk profile, the utility's overall credit profile appears weaker," said Hempstead. "Most issuers still have time to revise their financing policies."

Even so, he said, Moody's is concerned that the turmoil in the financial markets, continued uncertainty associated with Federal loan guarantees, and the general tenor associated with bank credit facilities and liquidity will make such revisions more difficult in the future.

"In order to defend existing ratings, or to limit negative rating actions, we will look for investor-owned utilities to create strategic partnerships, to share costs and risks, and to increase reliance on equity as a component to financing plans," said Hempstead. "We would also expect them to moderate their dividend policies to retain cash flow, and to adopt a 'back-to-basics' focus on core electric utility operations, posing less distraction for management."

In addition to a fundamental focus on core operations and management, the Moody's report outlines how municipal and cooperative utilities should be expected to increase up-front rates to consumers in order to build liquidity cushions and prevent rate shocks.

"From a risk mitigation perspective, the prospect of seeking business partners—particularly major multinational energy companies with some experience in the nuclear arena — might also be worth exploring as a good way to preserve liquidity and cash flow, while still reaping the benefits of new nuclear power generation," said Senior Vice President Dan Aschenbach, , a co-author of the report.

The report, "New Nuclear Generation: Ratings Pressure Increasing," is available at:

www.moodys.com