Manageable credit impact for US power, utility sector despite Japanese N-crisis: Fitch

The near- to intermediate-term impacts to credit quality in the US power and utility industry from the ongoing Japanese nuclear crisis is likely to be manageable within current rating levels.

According to a new Fitch report, the rating agency does not anticipate a US regulatory response that significantly reduces nuclear power output in the near term.

However, over the longer term, the cost of potential safety-related nuclear plant upgrades or shutdowns, could pressure credit ratings for owners of nuclear power plants in the intermediate- to long-term, particularly merchant generating companies.

"While the situation at Fukushima is still unfolding, we forecast only modest rating implications for the sector," says Phil Smyth, senior director at Fitch. "The reliance on nuclear power to meet the nation's energy needs, combined with the conflicting environmental mandates that affect coal-fired generation, augurs for a continued dependence on nuclear energy."

Most vulnerable to regulatory restrictions are nuclear generating plants located in coastal, seismically active areas, such as California.

Merchant generating companies with large nuclear investment that are dependent on market-based prices to recover incremental costs could experience adverse financial consequences, while investor-owned utilities (IOUs) and public power entities with strong tariff recovery of investments and costs are more insulated.