A Message From
the Chairman and President

In 2019, MEAG Power delivered to our Participants advantages that matter across the spectrum.

We provided our Participant communities reliable, competitively priced wholesale power from a portfolio with an already exceptional non-emitting profile. We initiated the process with our Participants to evaluate the addition of solar power based on its improved economics and to help meet increasing interest from our communities. This effort supports a broader approach to make our generation portfolio even cleaner over the next decade. We maximized opportunities to buy and sell power in the electric markets. We lowered our debt costs through prudent public debt offerings and federal loan guarantees. And we continued on course with Plant Vogtle Units 3&4, which will provide additional clean baseload power for decades to come.

These and many other advantages we provide to our Participants enable them to ensure that their communities remain competitive and successful for the long term.

Maintaining System Reliability & Security

In a year when California, New York City and Washington, D.C., all reported significant electric service outages, MEAG Power maintained solid system reliability and integrity, while delivering notably strong levels of performance.

For the year, the Wansley Combined Cycle Generating Station achieved a record capacity factor of 67.13%, the highest level of annual unit utilization since its commissioning in 2004. We also set historical monthly system peak demands in three separate months in 2019: 1,854 MW in May; 1,933 MW in September; and 1,920 MW in October.

Plant Vogtle Unit 2, prior to entering its 2019 spring refueling outage, completed its first breaker-to-breaker run in eight years, operating safely and reliably for 522 consecutive days. Vogtle Unit 1 also marked a breaker-to-breaker run in March 2020 after 519 consecutive days.

These non-stop performance cycles, generating a steady, continuous supply of low-cost, clean energy, underscore the benefits of baseload nuclear power and the proficiency of the teams operating the units. It is worth noting that 100% of the individuals in Initial License Training Class 22 at Vogtle Units 1&2 passed the Nuclear Regulatory Commission license exam in August.

System reliability is also tied to transmission performance. To ensure the reliability of Georgia’s Integrated Transmission System (ITS), MEAG Power and our partners in the ITS continued to invest in maintaining and upgrading this valuable asset over the course of the year. Funds were invested to replace equipment, construct new lines, reduce the number of outages and decrease restoration times. In 2019, we achieved transmission system reliability of 99.997%, with only two distribution breaker misoperations out of 1,079 interruptions, for a 99.81% reliability of the service points to Participants.

System security is another vital aspect of reliability. And cybersecurity is an increasingly important component of our overall security profile. In November, MEAG Power was among the more than 425 government and energy sector organizations in North America that took part in the two-day GridEx V, a biennial exercise designed to test how individual utility companies and the industry as a whole would react to a coordinated cyber and physical attack on the North American electric grid. Nearly 20 MEAG Power employees from six different departments participated in the exercise.

Also, in 2019 MEAG Power and Electric Cities of Georgia (ECG) sponsored two Cybersecurity Workshops for Participants, and we started a Cybersecurity Working Group, bringing together information technology (IT) employees from Participants to share best practices and get valuable insights from security experts representing the FBI, the Georgia Technology Authority and the American Public Power Association (APPA), to name a few.

We supported ECG in their launch of a new Cybersecurity Portal that showcases numerous resources where Participants can access tools and information. Keeping abreast of the latest developments and learning ways to assess and continually improve the security of individual distribution systems is vital.

Making Our Portfolio Even Cleaner

The push toward more clean energy and renewable resources is inevitable. In fact, renewable energy investments in the U.S. reached a record $55.5 billion in 2019. Fortunately, MEAG Power is favorably positioned to deliver clean, competitively priced wholesale energy, now and in the future.

Since 2008 the wholesale power we have delivered to our Participants has been greater than 50% emissions-free. In 2019, 67% of our delivered energy was emissions-free, compared to the 2018 Georgia average of 35% and the 2018 U.S. average of 36%. We are clearly in an advantageous place in the industry, but we continue to work to make our portfolio even cleaner in the coming years.

As mentioned earlier, in 2019 we initiated the process to evaluate the addition of solar power. In part, the solar initiative is aimed at helping Participants meet the needs of current and prospective commercial and industrial customers.

Through a request for proposal process, MEAG Power received multiple offers that were reviewed and summarized for discussion with the Participants. Based on the interest expressed by the Participants, MEAG Power has moved forward and is continuing discussions with a shortlist of bidders. If an agreement is reached and a power purchase agreement (PPA) is executed, the expected commercial operation date would be in 2022 or 2023.

We will further enhance our emissions-free generation when Plant Vogtle Units 3&4 are expected to become operational in 2021 and 2022, respectively. (Details on the 2019 Vogtle Units 3&4 milestones are below.)

Moreover, in 2019 we mapped out numerous other resource portfolio transition opportunities available in the coming decades (discussed in detail on the previous pages), and set in motion a new Integrated Resource Plan. This planning process will address options for MEAG Power’s portfolio, in multiple scenarios, and will assist us in evaluating these options for each individual Participant. It will serve as a starting point for discussions with every community as we continue to optimize our resource portfolio.

By 2044, we could see our delivered energy portfolio be more than 98% non-emitting.

Maximizing Off-System Sales & Purchases

Buying and selling power in the public power marketplace is a major component of helping our members’ systems operate efficiently and cost-effectively. Being a member of The Energy Authority (TEA) gives MEAG Power a significant presence in the marketplace and supports our ability to maximize the value of MEAG Power’s assets.

In 2019, economically scheduling our resources with support from TEA, we were able to make certain that our Participants’ electric loads could be supplied at the lowest costs.

TEA provides the hour-to-hour market analysis that allows MEAG Power to constantly evaluate whether market purchases or sales would improve the cost to the Participants. In hours when the hourly power markets are below the incremental cost to generate the power, TEA provides the mechanism to take advantage of these market efficiencies by reducing our scheduled generation and replacing it with market purchases. According to TEA, in 2019 those purchases actually reduced MEAG Power Participant costs by $3 million versus if we had run our own resources to generate that power.

In hours that the hourly market is above the incremental cost to generate, MEAG Power resources can be sold at a margin into the wholesale market. These off-system sales in 2019 generated $2.7 million in margins better than our budget.

MEAG Power also facilitates purchase and sales transactions among members, another way we help balance supply and demand while helping keep Participant costs down.

Overall, in 2019, MEAG Power’s operating costs were under budget, and we were able to provide our Participants a $28 million year-end settlement.

Lowering Our Cost of Debt

Maintaining vigilance on cost is something that runs through every facet of our operations, including our weighted average cost of debt for project financing. In 2019 we achieved notable debt cost reduction through prudent public debt offerings and federal loan guarantees.

In March, to continue to fund our share of the Plant Vogtle construction, we closed on $414.7 million in additional loan guarantees from the U.S. Department of Energy. And in July, MEAG Power completed a limited public debt offering, raising $619 million, which will fund Project J’s share of the anticipated costs related to the Vogtle expansion.

MEAG Power worked to complete public market debt offerings for Projects M and P in September. These transactions raised $493 million and $291 million to fund estimated completion expenditures for Projects M and P, respectively.

The sum of these additional federal loan guarantees and well-received debt offerings was interest cost savings of approximately $17 million per year and $385 million net present value over the life of the debt.

Reaching Key Plant Vogtle Milestones

All expected key construction milestones for Units 3&4 were accomplished in 2019, including:

• Pressurizer installed in Unit 4: In January, the pressurizer was placed inside the Unit 4 containment vessel. The pressurizer provides pressure control inside the reactor coolant system during operation.
• Top head placed on Unit 3 containment vessel: In March, the top head of the containment vessel for Unit 3 was placed. This step followed the placement of all modules and large components inside containment.
• Vogtle Unit 3 achieved initial energization: In May, plant equipment for Vogtle Unit 3 was energized, or permanently powered, which is needed to perform all subsequent testing for the unit.
• Middle and third containment vessel rings placed on Unit 4: Following the June placement of the Unit 4 middle containment vessel ring, the third and final ring was placed in November.
• First fuel order placed: In July, Southern Nuclear officials signed the first order for Vogtle nuclear fuel. Purchased from Westinghouse, the fuel assemblies will be delivered via truck in multiple shipments beginning in the summer of 2020.
• Open vessel testing of Unit 3 began: The latest phase of testing, Open Vessel Testing, began during November at Unit 3. Open Vessel Testing demonstrates how water flows from the key safety systems into the reactor vessel, ensuring the paths are not blocked or constricted and will confirm that the pumps, motors, valves, pipes and other components of the systems function as designed.
• Vogtle Unit 3 completed first Emergency Preparedness Drill: In November, Unit 3 successfully completed the first Emergency Preparedness Drill. This was an important step in preparing Vogtle for a Nuclear Regulatory Commission (NRC) evaluated exercise in 2020.
• Vogtle Unit 3 shield building roof set: The 2-million-pound roof of the Unit 3 shield building was set into place in December. The shield building roof provides structural support to the containment vessel, which houses the reactor vessel and associated equipment.
• Vogtle Unit 3 main control room supports testing: One of the most significant milestones in the project’s history occurred in December when operators began using the Unit 3 control room to support testing of plant systems, marking a major step in the project’s transition from construction to operations.

On April 15, 2020, Georgia Power announced a reduction in work force at Vogtle Units 3&4 expected to total approximately 20%. This reduction is intended to address the impact of COVID-19 on the Vogtle Units 3&4 work force and construction site. Georgia Power has reported that, assuming absenteeism rates normalize and the intended productivity efficiencies are realized in the coming months, it does not expect this mitigation action to affect the total project capital cost forecast or the ability to achieve the regulatory approved in-service dates of November 2021 and November 2022 for Vogtle Units 3&4, respectively.

Being part of the first new nuclear project in our country in over 30 years is both challenging and exciting, and we look forward to the days when these two units, each with a projected operating life of 60 years, come online. They will provide economical and reliable carbon-free generation for decades to come.

Communicating With Our Participants

MEAG Power and our Participants have always enjoyed open communications. Through a number of activities, from roundtable discussions at member locations to presentations at our Annual Meeting and Mayors Summit, we each have opportunities to share what is on our minds.

We also continued our Participant Orientation Meetings this year, inviting Participant employees to come to Atlanta and meet our staff while learning about the various MEAG Power functions. Our new employees also visit Participant communities in each area of the state.

Added to these events are our regular Current Newsletter, MEAG 101 briefings, press releases, brochures, advertising, the annual report, quarterly reports and Under the Domes legislative updates.

We will continue to provide our Participants every advantage possible to enable them to ensure that their communities remain competitive and successful into the future.

Terrell D. Jacobs
Chairman

James E. Fuller
President and Chief Executive Officer

April 30, 2020