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A Message From the
Chairman & President

A Challenging Year of Accomplishment

In a year that challenged our country, our state, our operations and our Participant communities in ways we never could have imagined, MEAG Power and our employees remained resilient and adapted to the countless changes and requirements of the new paradigm.

Terrell D. Jacobs
Chairman, MEAG Power

James E. Fuller
President and Chief Executive Officer

We continued to provide our Participant communities the reliable, competitively priced wholesale power they need to ensure their long-term success, while working with them to lessen the financial impact of the pandemic. And despite the myriad challenges, we made significant accomplishments across a number of important areas of our business, from moving closer to Plant Vogtle Unit 3 entering commercial service to highly successful bond sales and credit ratings upgrades to approving a new Integrated Resource Plan, among many others.

The Pandemic Wreaks Havoc

The COVID-19 pandemic approached early in the year with alarming speed and uncertainty. As it became clear that it was no longer safe to continue normal operations in our headquarters, senior management made the decision to close the office starting on March 16 to all but essential system operations employees.

From March through the end of the year, 76% of employees worked remotely, 18% split their time working remotely or reporting to the office, and 6% of employees who are field staff continued to conduct business on construction sites or at other MEAG Power facilities.

Thanks to remote-work infrastructure already in place – although used in a limited capacity by employees before the pandemic – Information Services (IS) was able to quickly ramp up to a more robust, secure system to enable the vast majority of our employees to conduct their daily work remotely. This included the ability to securely connect to our network for file access and sharing, conduct virtual meetings over numerous different platforms, and work as efficiently as possible despite the circumstances. MEAG Power has continued to prioritize support for our remote workers, increase awareness of pandemic-related cybersecurity threats, and improve the reliability of our network.

Monthly board meetings were shifted to teleconferences, as was our annual meeting and the concomitant election for three board members. Instead of conference-table group meetings or impromptu office gatherings, many employees became well-versed users of Zoom, WebEx, Skype and other virtual platforms. Despite these challenges, we completed both small and large projects, and our focus on our Participants never wavered.

Because just as it was a trying time for MEAG Power’s daily operations and employees – in both their work and family lives – so too was it a difficult year for our Participant communities. The pandemic took a deadly toll on many communities, and the economic and social impacts wracked populations, local governments and utilities across the state. Record levels of unemployment and increased residential power usage strained communities financially, while temporarily idled factories and decreased commercial and industrial usage led to an overall reduction in system demand, which is slowly increasing toward pre-pandemic levels.

MEAG Power quickly worked to reduce our 2020 budget by $40.6 million to help lessen the monthly cost burdens on Participants. We also worked with one of our financial institutions to develop a gap funding agreement to provide a ready source of liquidity for Participants to fund any COVID-19 related utility revenue shortfalls when paying their MEAG Power bills.

The pandemic likewise challenged progress toward completion of Vogtle Units 3&4, as COVID-19 infections among the workforce necessitated new workplace protocols and a reduced workforce on-site. Still, work was never halted, and numerous milestones were reached throughout the year.

Approved IRP Sets Roadmap for the Future

Despite the historical challenges 2020 brought, the U.S. economy and energy sector continued moving with increasing speed toward a clean-energy future, with a growing list of utilities, municipalities and states announcing their zero-carbon goals. But most utilities are starting from a position not nearly as favorable as ours is today.

At MEAG Power, our delivered energy is already exceptionally clean. We ended 2020 with a delivered energy portfolio that is 69% emissions-free. And we have in place upcoming nuclear and planned solar portfolio additions that, when they enter service, will help us align even closer with business and municipal clean energy priorities as our emissions-free delivered energy percentage continues to grow.

Our Integrated Resource Plan (IRP) approved in 2020 provides a roadmap to meet the future capacity and energy requirements of our 49 Participant communities. Developed with the support of The Energy Authority (TEA), the IRP identified resource needs over the study period (2020–2045), focusing on the first 10 years of actionable alternatives.

TEA recommended the resource plan that best met MEAG Power’s business objectives, and we used an internally developed cost assignment methodology to examine the recommended plan at the Participant level. MEAG Power staff members met with each Participant to review the results in late July and early August, and the MEAG Power Board approved the Integrated Resource Plan in August.

The newly adopted IRP calls for a number of strategic steps, most already underway:

  1. Continue to lessen our reliance on coal, and to exit our participation in Plant Wansley’s coal units.
  2. Complete our first solar power purchase agreement (PPA), an approximately 100 MW initiative, with a targeted commercial operation date of 2024, and add solar PPA resources to satisfy future capacity requirements.
  3. In coordination with other co-owners, support application for a subsequent license renewal to extend the operating license for Plant Hatch Unit 1 from 2034 to 2054, and for Unit 2 from 2038 to 2058.
  4. Integrate the output from the new Plant Vogtle Units 3&4 into our portfolio when they are slated to come online in 2021 and 2022, respectively.
  5. Continue to periodically update the IRP, at approximately 3-year intervals, as part of an effective ongoing planning process.

Plant Wansley Exit Plan Approved

In 2020, coal generation made up only 2% of our delivered energy portfolio, as MEAG Power took advantage of more economical resources. The year began with historically low natural gas prices that resulted in record usage of our Wansley combined-cycle gas unit over the course of the year: a record capacity factor of 69.26%. At the same time, dispatch from the Wansley 1&2 coal units was nearly 0%, and the capacity from the two coal units continued to be in excess of the majority of Participant needs.

Wansley Units 1&2 were operational as of 1976 and 1978, respectively, with MEAG Power’s ownership at 15.1% of the units. The units’ net capacity factor has been in near-steady decline for the past several years.

Moreover, the Wansley Units 1&2 operating agreement expired in March 2018 and has been continued on a series of 12-month extensions, with an annual option to renew or terminate.

The 2020 IRP analysis of the economics of exiting the Wansley operating agreement and MEAG Power releasing output from the units showed that we could avoid variable and fixed operating costs, and avoid ongoing renewal and replacement costs for the units. The IRP forecasted net present value savings of approximately $120 million, the reduction in fixed costs for all Participants, and the addition of solar resources, along with the release of Wansley output, providing supplemental economic benefit.

The MEAG Power Board approved a notice of termination during the October 2020 Board meeting, and that notice was provided to Georgia Power on October 30. MEAG Power’s ownership interest in the Units will remain intact.

Despite the plan to exit the Wansley operating agreement, and while coal continues to decline in use, it still plays a role in MEAG Power’s utilization of its diverse portfolio to ensure the reliable and economical supply of power.

Adding Solar to Our Resource Portfolio

The 2020 Integrated Resource Plan validated the process we began in 2019 of evaluating the addition of solar power to our resource portfolio. Solar continues to grow in attractiveness as a clean-energy option for a number of reasons:

  • Utility-scale solar costs continue to decline. According to the Berkeley Lab, the median installed price of utility-scale solar projects that came online in 2019 fell by 20% from 2018 and was down by more than 70% from 2010. And, nationwide, average levelized PPA prices fell to $24/MWh in 2019, down 17% from 2018 and a drop of more than 80% since 2010.
  • As prices continue to fall, solar installations increase. U.S. solar installations continued to grow in 2019, according to the Solar Energy Industries Association and Wood Mackenzie, adding 13.3 gigawatts, up from 10.6 gigawatts in 2018, and bringing the cumulative total to 76 gigawatts.
  • Solar leads installed generation: Fully 40% of all power generation installed in the U.S. in 2019 was solar, surpassing all other power sources for just the second time. Wood Mackenzie projected around 18 gigawatts of new solar installations in the U.S. in 2020.
  • Southeast leading the nation: For the third year in a row, according to the Berkeley Lab, the Southeast led all other regions in 2019 in terms of new utility-scale PV capacity additions.

With this very favorable context as the backdrop, MEAG Power also recognized the value of solar to our Participants: the ability to offer long-term renewable energy contracts (and Renewable Energy Credits, or RECs) to commercial and industrial customers that have corporate sustainability goals for their businesses; the ability to meet the demand for community solar programs and some residential customers’ desire for “green” energy; and as a means to meet peak system needs as part of a diversified resource portfolio.

As 2020 ended, we continued to evaluate bids from the RFP issued earlier for a PPA of approximately 100 MWs. The business benefits of a PPA to add solar to our resource portfolio are clear: having no ownership of the facility, and thus no fixed costs, and locking into a favorable fixed energy price for the anticipated 20-year term of the agreement. This structure also allows MEAG Power to take advantage of existing tax incentives, not available directly to us, that can be obtained by the solar developer and passed on as a reduced energy cost.

In addition to the current solar initiative, we envision future solar PPAs as means to add clean, low-cost energy to our portfolio on an as-needed basis.

Plant Vogtle Units 3 & 4 Progress Continues

The massive effort to complete Vogtle Units 3&4, while hampered by the pandemic and necessary worksite protocols, continued throughout the year. The 7,000-strong workforce accomplished a number of milestones toward completing Units 3&4.

Unit 3 Hot Functional Testing Begun – On April 26, 2021, it was announced that hot functional testing had begun for Plant Vogtle Unit 3. Hot functional testing marks the last series of major tests underway for the new nuclear unit ahead of initial fuel load. Hot functional testing is conducted to verify the successful operation of reactor components and systems together and confirm the reactor is ready for fuel load. As part of the testing, the site team will begin running Unit 3 plant systems without nuclear fuel and advance through the testing process toward reaching normal operating pressure and temperature. Hot functional testing is expected to take six to eight weeks.

2020 milestones included, in reverse order of completion:

Unit 3 Condenser Vacuum Test – The test was conducted with the main turbine on turning gear and by operating supporting systems to establish the condenser vacuum, which is necessary to demonstrate the steam supply and water-cooling systems operate together and are ready to support hot functional testing and initial fuel load in the reactor.

Unit 4 Shield Building Roof Placement – The two-million-pound roof of the Unit 4 shield building has been set into place. With this placement, there remained one last major crane lift for Unit 4, the Passive Cooling Water Storage tank, or CB-20 module, which is part of the AP1000 reactor’s advanced passive safety system. (The CB-20 module was lifted into place as of April 26, 2021.)

Unit 3 Nuclear Fuel Receipt – With the receipt of the first nuclear fuel assemblies in December, the site is preparing for the last major test remaining for Unit 3, hot functional testing, ahead of initial fuel load.

Completion of Unit 3 Cold Hydro Testing – Confirmed the reactor’s coolant system functions as designed and verified the welds, joints, pipes and other components of the coolant system and associated high-pressure systems do not leak when under pressure.

Emergency Preparedness Drill – Vogtle 3&4 completed a required emergency preparedness exercise for a simulated emergency event for Vogtle Unit 3. Teams participated in the simulation and demonstrated their ability to effectively and efficiently respond and protect the health and safety of the public.

Vogtle 3&4 Operators Receive Licenses – The Nuclear Regulatory Commission (NRC) issued the first operator licenses to 62 Reactor and Senior Reactor Operators for Vogtle 3&4. To receive a nuclear operator license from the NRC, license holders must demonstrate that they possess the required knowledge, skills and abilities to safely and effectively operate the units.

Completion of Closed Vessel Testing – The completion of this milestone prepared Unit 3 for cold hydro testing. Closed vessel testing verified the pipes and valves in the Unit 3 reactor coolant system were installed as designed and helped ensure safety systems function properly.

Completion of the Structural Integrity Test and Integrated Leak Rate Test – Both tests were completed in succession for Unit 3 and demonstrated the containment vessel meets construction quality and design requirements.

Placement of the Final Module for Unit 3 – The water tank that sits atop the containment vessel and shield building roof will hold approximately 750,000 gallons of water ready to flow down in the unlikely event of an emergency to help cool the reactor.

Placement of the Unit 3 Integrated Head Package (IHP) Atop the Reactor Vessel – Standing 48 feet tall, weighing 475,000 pounds and containing more than three miles of electrical cables, the IHP will eventually be used by highly-trained nuclear operators to monitor and control the nuclear reaction that will occur inside the Unit 3 reactor vessel.

Completion of Open Vessel Testing for Unit 3 – This successfully demonstrated how water flows from the key safety systems into the reactor vessel, ensuring the paths are not blocked or constricted, and confirmed the pumps, motors, valves, pipes and other components of the systems function as designed.

Placement of the Polar Crane and Containment Vessel Top for Unit 4 – This signified that all major lifts inside the containment vessels for both units are complete.

Smart Grid, Operational Successes

Just as Vogtle work continued in 2020, so too did ongoing MEAG Power transmission field work. The second phase of our ongoing successful Smart Grid project reached 98% completion by year’s end and is slated to be wrapped up in May 2021. Phase one ran from 2010 to 2013 and included work on 133 substations. The initial project was part of a Department of Energy program to incentivize the modernization of the nation’s electric grid.

The 5-year, $10 million second phase of the project began in 2016 to modernize the equipment in all remaining substations, including those not completed in the initial phase. Ending 2020, only two of those 107 substations remained to be completed.

The project work has included: replacing the existing remote terminal units (RTUs), upgrading the existing revenue meters to power quality smart meters, upgrading communication routers, installing microprocessor-based relays for feeder breakers, installing digital regulator control panels, and installing SCADA remotely controlled motor operators on transmission switches.

Updating this vital substation equipment with modern, smart technology has numerous benefits: reduced substation maintenance costs; predictive sensing of system conditions; improved power system reliability; “smart” equipment diagnostic information; improvements that will support future distribution automation; remote access to SCADA data for improved control; enhanced cybersecurity protection; and capturing data to improve system management.

The smart grid work to date continues to deliver the promised benefits. Through the end of 2020, there had been zero misoperations on feeder breakers for the past 17 months. From 2013 to 2020, there was a 66% reduction in outage minutes. There has also been a marked improvement in reporting capabilities to Participants of breaker operations and voltage limits. And in 2020, MEAG Power’s overall system reliability was 99.998%, the highest since we began recording.

Significant Legal Victory

MEAG Power’s 2020 accomplishments extended into the legal realm, with a significant victory that ended the multiyear litigation involving the Plant Vogtle Units 3&4 Project J power-purchase agreement (PPA) with JEA.

On June 17, U.S. District Judge Mark Cohen granted MEAG Power’s Motion for Judgment on the Pleadings, declaring that the PPA “is VALID AND ENFORCEABLE” and that “the PPA unconditionally requires JEA to pay MEAG Power for capacity and energy at the full cost of production of Project J, including debt service on the bonds and DOE-guaranteed loans”. The ruling confirmed the merits of MEAG Power’s position on this matter while avoiding a prolonged and costly trial.

Under the terms of the PPA, which was signed in 2008, and amended and restated in 2014, JEA committed to purchase all of the Project J share of the energy generated by the new units 3 and 4 of the Alvin W. Vogtle Electric Generating Plant (“Plant Vogtle”) during their first 20 years of operation, as well as to pay for approximately 41% of MEAG Power’s share of the construction cost for the new units during those 20 years. JEA also attested to the validity of the PPA in three separate court validation proceedings, fully understanding that the financial community would rely upon such representations in providing funds necessary to finance the Project.

Despite this, in late 2018, JEA and the City of Jacksonville launched a series of legal and regulatory maneuvers in an attempt to have that agreement invalidated. These included filing a lawsuit in state court in Florida, launching a failed attempt to seek intervention by the Federal Energy Regulatory Commission, and engaging in a costly, misleading public relations campaign against MEAG Power. To defend the agreement and protect our 49 Participant communities, MEAG Power filed counterclaims, including a request to change jurisdiction to the U.S. District Court for the Northern District of Georgia, where the dispute was decided in MEAG Power’s favor.

In their lawsuit, the City of Jacksonville and JEA leveled a lengthy series of claims regarding the legality of the agreement. In his 53-page order, Judge Cohen rejected each of these claims in turn.

After a series of discussions following Judge Cohen’s ruling, on July 30 JEA, the City of Jacksonville and MEAG Power announced a settlement of all disputed issues relating to the new Plant Vogtle Units 3&4 and the Project J PPA.

Terms of the settlement included JEA and the City of Jacksonville dismissing their civil action against MEAG Power then pending in U.S. District Court, and MEAG Power dismissing its lawsuits against JEA then pending in U.S. District Court and the U.S. Court of Appeals. Further, JEA, the City of Jacksonville and MEAG Power agreed to accept without challenge or appeal the Order entered by Judge Cohen, including without limitation his determination that the JEA PPA is Valid and Enforceable. Terms also included certain provisions that will create additional future value to both JEA and MEAG Power.

Successful Financing Activities

In addition to numerous cost-saving financing activities during the year, MEAG Power facilitated an Enterprise Risk Management (ERM) review and enhancement process, revising the organization’s ERM policy and forming a new Executive ERM Committee.

We also planned and implemented a new investor website that provides comprehensive MEAG Power information for existing and potential investors, enhancing our ability to achieve low-cost financing. The new site offers easily accessible annual reports, annual information statements, official statements, Project-specific information and documents, updated Plant Vogtle and MEAG Power press releases, bond sales, roadshow and ratings information, and links to the EMMA website for CUSIP filings, in addition to a host of other relevant information.

Financing successes on the year included: amending and extending three credit agreements to provide $162.5 million of loan capacity to support MEAG Power Projects; replacing a remarketing agent on a $148-million variable-rate bond, resulting in annual savings of $59,000; and receiving $424.3 million in Department of Energy (DOE) Guaranteed Loan proceeds in October for Vogtle Projects M, J & P. Of special note is that the DOE loan proceeds provided an initial total weighted average interest rate of 1.28% – a historically low rate of interest that will result in significant cost savings over the term of the loan. By comparison, MEAG Power’s total average interest rate on debt at year-end 2020 was 4.10%.

In the fourth quarter, we completed two successful bond sales and a bond refunding. MEAG Power sold $194.4 million of Project One Bonds with an all-in total interest cost of 2.79%, with 10.6 years weighted average maturity. In addition, we sold $58.5 million of General Resolution Bonds with a 2.23% all-in total interest cost, with 9.8 years weighted average maturity. And we completed a Combined Cycle (CC) Project Bond Refunding, which refunded existing bonds for economic savings, in this case resulting in estimated Net Present Value savings of $13.5 million.

Finally, following the JEA and City of Jacksonville settlement, MEAG Power reaped the benefit of two successive ratings upgrades from Moody’s Investors Service. Moody’s first upgraded MEAG Power’s Plant Vogtle Units 3&4 Project J revenue bonds from Baa3 to Baa2, then further upgraded the Project J revenue bonds to Baa1, with a positive rating outlook.

Government & Corporate Affairs Successes

It was a year of both action and reaction in Government & Corporate Affairs. MEAG Power completed major long-planned projects and responded quickly and efficiently to unanticipated needs related to the pandemic.

As mentioned earlier, we responded with a tremendous effort to ramp up MEAG Power’s remote-work infrastructure and capabilities on short notice when our headquarters office was closed in March. In less than a week we designed, tested, and deployed a remote-working plan for all employees. We also implemented enhanced security measures, worked to resolve home networking issues and stabilize connectivity, and assisted in implementing physical security changes supporting essential staff still working in the headquarters building.

We continue to monitor systems and processes to keep the MEAG Power infrastructure secure and reliable. No major infrastructure projects have been required as a result of the pandemic, but the knowledge gleaned from this period will inform IS planning into the future.

Another unanticipated accomplishment was successfully planning and executing our first Virtual Mayors Summit in November, a fully online version of our annual event to promote the advocacy of issues important to MEAG Power and the Participant communities.

The MEAG Power Board room was transformed into a de facto socially distanced broadcast studio, with an AV crew working together with MEAG Power staff to produce the event. A total of 34 Participant communities were represented among the event participants, with approximately 100 registered participants.

We also successfully planned and launched a new MEAG Power corporate website in 2020. The new site was built using the industry-standard platform, WordPress. It is a modern, best-in-class site that reflects MEAG Power’s industry position, is mobile-friendly on all devices, is an effective tool for corporate branding and a marketing information resource for MEAG Power and Participants.

The site focuses on the importance of our relationship with Participants, and on the interplay of joint action and public power – specifically, on the benefits MEAG Power delivers to Participants, and Participants deliver to their communities. The site provides a detailed array of information on MEAG Power’s background and operations. It also includes a new Participants section with an interactive map that serves as the gateway to information about each Participant, and highlights the ongoing economic development in our Participant communities. The site also features an all-new Careers section to provide an array of information about the benefits of working at MEAG Power.

MEAG Power was gratified to learn that our 2019 annual report won an Award of Merit in the APPA’s annual Excellence in Public Power Communications Awards. “Awards were given to those that showed ingenuity and creativity in telling their stories through outstanding copy, design, financial data presentation and graphics...,” according to the APPA. MEAG Power’s 2019 annual report was recognized in the Print/Digital category among peers with gross revenues of $400 million or more.

In Government Affairs we maintained our outreach efforts, continuing discussions and consultations with the Georgia delegation, state legislators and trade associations regarding policy and proposed legislation of interest to MEAG Power and our Participants. While the lack of in-person meetings offered particular challenges in conducting this outreach, the relationships built and nurtured in previous years allowed this function to effectively proceed.

Proposed Southeast Energy Exchange Market

Throughout the year, MEAG Power was involved in discussions about launching a new centralized, region-wide intra-hour energy exchange with the goal of lowering costs, optimizing new renewable energy resources and improving reliability. The proposed platform is called the Southeast Energy Exchange Market, or SEEM.

The new SEEM platform will facilitate sub-hourly, bilateral trading, allowing participants to buy and sell power close to the time the energy is consumed, utilizing available unreserved transmission. The platform is an extension of the existing bilateral market.

The result will be cost savings and improved integration of all energy resources, including renewables, which are expanding rapidly in the Southeast. This will lead to a cleaner, more robust electricity system.

SEEM members are expected to include Associated Electric Cooperative, Dalton Utilities, Dominion Energy South Carolina, Duke Energy Carolinas, Duke Energy Progress, ElectriCities of North Carolina, Georgia System Operations Corporation, Georgia Transmission Corporation, LG&E and KU Energy, MEAG Power, NCEMC, Oglethorpe Power Corp., PowerSouth, Santee Cooper, Southern Company and TVA.

The expected founding members represent nearly 20 entities in parts of 11 states with more than 160,000 MWs (summer capacity; winter capacity is nearly 180,000 MWs) across two time zones. These companies serve the energy needs of more than 32 million retail customers (roughly more than 50 million people).

SEEM members filed with the Federal Energy Regulatory Commission (FERC) in February 2021 for approval of the platform. If approved, SEEM could be operational by early 2022.

Membership in SEEM is voluntary. MEAG Power continues to evaluate SEEM’s potential benefits and has not yet committed to joining the platform.

A Hopeful Outlook

Soon after we transitioned to majority remote work, we formed a committee to plan for our eventual return to the office – not anticipating that it would be delayed by at least another full year beyond our initial expectations. The health and safety of MEAG Power’s employees, contractors and Participants is the guiding principal in this Return to the Office Plan.

2020 ended with the hopeful news in December of approval of the first two COVID-19 vaccines, and a nationwide mobilization to begin the months-long vaccination effort. At the time of publication, a third vaccine had been approved and vaccination levels were increasing.

We share the hopefulness of our Participant communities, our state and our nation that – though we know the pandemic is still far from over – we are getting closer to a time when we can begin to resume more normal activities and operations.

It is MEAG Power’s intent to be responsible, measured, and flexible when transitioning employees who are working remotely back to the office.

In addition, we plan to go forward with an in-person annual meeting in July – following whatever COVID-19 safety protocols remain in place at that time. It will be the first such gathering for MEAG Power, our Participants, our families and friends in 20 months.

Our hopefulness extends to an economic rebound after the pandemic. As we all work toward a better future, the essential connection we have with our Participants will drive us to provide every advantage possible to them in order to ensure that their communities remain competitive, successful and ready for the future.

Terrell Jacobs signature

Terrell D. Jacobs

James Fuller signature

James E. Fuller
President and Chief Executive Officer

April 30, 2021