| NEW YORK, March 30
NEW YORK, March 30 The sell-off of municipal
bonds tied to the bankruptcy filing of Westinghouse Electric Co
paused on Thursday as investors reconsidered concerns on the
likelihood that construction of four U.S. nuclear power plants
hit by billions in cost overruns will be completed.
The four reactors are part of two projects known as V.C.
Summer in South Carolina, which is majority-owned by SCANA Corp
and Vogtle in Georgia, which is owned by a group of
utilities led by Southern Co.
Westinghouse is a unit of Japanese conglomerate Toshiba Corp
Tax-exempt bonds issued by the Municipal Electric Authority
of Georgia (MEAG), which owns 22.7 percent of the Vogtle units,
and South Carolina Public Service Authority (Santee Cooper),
which owns 45 percent of the V.C. Summer units, reversed a
recent slide, albeit in thin trading volumes.
"It could be considered a dead-cat bounce in the market as
people are starting to get comfortable with their ability to pay
their bonds and it doesn't appear that this is going to lead to
a default," said Brett Adlard, municipal strategist at Piper
Jaffray in Chicago.
Adlard said there could be near-term weakness in the bonds
because of headline risks, but there is a slow realization that
there are underlying strengths, such as Santee Cooper's
flexibility to raise electricity rates given that the rates are
considered low when measured against the rest of the nation.
On Wednesday, SCANA executives told analysts that in the
case of the V.C. Summer operations, most of the components are
already bought and on site, which employs about 5,000 people.
"The Trump administration, being so pro-jobs, shutting down
these two large nuclear plants would look like a negative from
their goal," Adlard said, adding that Westinghouse's involvement
in military operations makes this a national security interest."
MEAG's 6.637 percent bond maturing in 2057 saw improvement
with the yield spread over the benchmark MMD yield curve
narrowing by 4.5 basis points to 285.7 basis points. However,
over the last 10 trading days, spreads are wider by a
significant 26.9 basis points, according to Thomson Reuters
Santee Cooper's 5 percent bond maturing in 2028 improved on
Thursday with the yield spread narrowing by 16.7 basis points to
95.1 basis points. That is still 35.6 basis points wider over
the last 10 trading days. Wider spreads
indicate weak performance in a credit.
Costs for the projects have soared due to increased safety
demands by U.S. regulators and also due to significantly
higher-than-anticipated costs for labor, equipment and
"These are fundamentally strong credits, but that said, they
have made a lot of investments in these plants and now there is
more uncertainty on how much more it is going to cost or how
much longer it will take to complete the plants," said John
Ceffalio, municipal credit analyst at AllianceBernstein in New
"To date, both MEAG and Santee Cooper have had a lot of
political support. We question how strong that support will be
going forward given additional costs and delays," he said.
(Reporting by Daniel Bases; Editing by Leslie Adler)