Moodys.com
Close
Please Note
We brought you to this page based on your search query. If this isn't what you are looking for, you can continue to Search Results for ""
The maximum number of items you can export is 3,000. Please reduce your list by using the filtering tool to the left.
Close
Close
Email Research
Recipient email addresses will not be used in mailing lists or redistributed.
Recipient's
Email

Use semicolon to separate each address, limit to 20 addresses.
Enter the
characters you see
Close
Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
Close
Thank you!
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
LOG IN
Don't want to see this again?
REGISTER
OR
Accept our Terms of Use to continue to Moodys.com:

PLEASE READ AND SCROLL DOWN!

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

Terms of One-Time Website Use

1.            Unless you have entered into an express written contract with Moody’s to the contrary, you agree that you have no right to use the Information in a commercial or public setting and no right to copy it, save it, print it, sell it, or publish or distribute any portion of it in any form.               

2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

3.            To the extent permitted by law, Moody’s and its directors, officers, employees, representatives, licensors and suppliers disclaim liability for: (i) any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with use of the Information; and (ii) any direct or compensatory damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud or any other type of liability that by law cannot be excluded) on the part of Moody’s or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with use of the Information.

4.            You agree to read [and be bound by] the more detailed disclosures regarding Moody’s ratings and the limitations of Moody’s liability included in the Information.     

5.            You agree that any disputes relating to this agreement or your use of the Information, whether sounding in contract, tort, statute or otherwise, shall be governed by the laws of the State of New York and shall be subject to the exclusive jurisdiction of the courts of the State of New York located in the City and County of New York, Borough of Manhattan.​​​

I AGREE
Rating Action:

MOODY'S ASSIGNS Baa3 RATING TO CE GENERATION LLC PROJECT FINANCE BONDS

23 Feb 1999
MOODY'S ASSIGNS Baa3 RATING TO CE GENERATION LLC PROJECT FINANCE BONDS Moody's Investors Service assigns a Baa3 rating to the $400 million bonds to be issued by CE Generation LLC.



SUMMARY OPINION OF CREDIT CONCERNS

Moody's has assigned a Baa3 to the U.S. bonds to be issued by CE Generation LLC (CEG), a newly formed generating company consisting of geothermal electric generating assets and natural gas fired electric generating assets. The company is being formed from the qualifying facilities (QF's) of CalEnergy which are being divested in conjunction with CalEnergy's merger with MidAmerican Energy Company (MEC) located in Iowa. At closing, CalEnergy will own 100% of CE Generation, but it is expected that CalEnergy will sell 50% to a unaffiliated third party prior to closing its merger with MidAmerican.


The Baa3 rating is supported by the quality of the assets, strength of power purchase contracts, resilient project economics and limited construction risk. Key credit concerns include: the high degree of leverage, exposure to commodity price risk, the risk of contract renegotiation and limited geographic and offtaker diversification.


PROJECT OVERVIEW

CEG will consist of a portfolio of fourteen (14) projects located in California, Arizona, Texas and New York totaling 826 MW of net-owned capacity. The portfolio cash flow is 51 % from geothermal assets and 49 % from natural gas fired assets. The weighted average availability for the last three years is 97% with an average capacity factor over the same period of 94%. All projects are qualifying facilities (QF's) and operate under contracts. The geothermal projects are 9 separate units in the Imperial Valley in southern California selling to Southern California Edison (SCE). The project-related debt for these assets was issued by Salton Sea Funding Corporation which is rated Baa2 by Moody's. There are four natural gas fired combined-cycle cogeneration plants: Saranac Power Partners, a 240 MW facility located in Plattsburgh, New York; Power Resources Inc.(PRI), a 200 MW facility located near Big Springs, Texas; NorCon Power Partners, a 80 MW facility located in North East, Pennsylvania; and, Yuma Cogeneration Associates, a 50 MW facility located in Yuma, Arizona.


PROVISIONAL RATING ONLY:


Moody's is issuing this provisional rating in advance of the final sale of the bonds described in this rating release based on information and documentation received as of February 22, 1999.



ANALYSIS OF KEY CREDIT RISKS:


Market Price Risk Exposure:


Base case coverage ratios are robust: 2.50x (Minimum)/ 3.11x (Average). Coverage ratios withstand various sensitivity tests:


Scenario DSCR (Min./Avg.)

Base Case 2.50x/3.11x

Higher O& M 2.35x/2.84x

Increased Heat Rate 2.40x/3.05x

Reduced Availability 2.06x/2.77x

Low Power Price 1 (10 % reduction) 2.40x/2.96x

Low Power Price 2 (15% reduction) 2.32x/2.80x




A significant portion of the revenues to CEG are exposed to market price risk due to the contractual provisions of the purchase power agreements which allow for energy pricing to follow the Short Run Avoided Costs (SRAC) of the offtaker utility. In the California market, the CPUC has indicated that the SRAC formulas now in place will be replaced by the Power Exchange (PX) once it is "fully functioning". It is estimated by Henwood Services, a market consultant, that the PX price will replace SRAC in 2000. We note that over the 20 year life of the debt of CEG, revenues determined by a "market price" whether SRAC or PX price range from 23% to 53% of the total revenues to CEG. Given the relative newness of the California PX and the volatility seen to-date, Moody's sees this as a significant risk to creditors of CEG.


Mitigating our concerns are the "must take" position of the assets as Qualifying Facilities which eliminates concerns about sales volumes assuming the future operating performance is predicted by the past operating performance. Equally important, is the low break-even prices relative to the market forecast. In Moody's analysis, CEG's break-even electricity price ranges from 31% to 87% below the forecast for off-peak marginal cost prices. While we believe actual prices may be lower than the forecast the low break-even prices for CEG allow the project to absorb substantial price volatility.


We note that the analysis includes no revenues from the natural gas projects after their contractual periods expire. Furthermore, during each year a portion of the revenues are fixed under a contract.


Portfolio Effect:

In addition to the strong coverage provided by the assets' distributions, CEG demonstrates a strong portfolio effect with the ability to continue to service debt with the elimination of cash flow from it two largest projects, Salton Sea IV and Saranac. Furthermore, any combination of two projects eliminated yields coverage ratios in excess of 1.0 times at the minimum and 2.0 times on average.



Risk of Contract Renegotiation/Loss of QF Status:

The Salton Sea assets enjoy the benefit of lucrative purchase power agreements with Southern California Edison with an average cost in 1998 of 11 cents per kwh compared to a PX average on-peak price ranging from 1.7 cents per kwh to 5.4 cents per kwh. In addition, much of the cost of the PPA's is in the form of a capacity payment which is a fixed cost purchasers will wish to avoid in the future. The high cost of the contracts relative to the spot market price creates an incentive to renegotiate. However, a market for "green power" in California is emerging, studies of which suggest that customers are willing to pay a 0.7 cents per kwh to 3.0 cents per kwh premium for environmentally-friendly power like geothermal. In addition the competitive transition charges provided in the California restructuring legislation make the likelihood of a concerted effort to renegotiate the contracts low. Finally, the age of the contracts and legal precedence would suggest they would withstand challenges.


While the QF status of the geothermal plants is relatively easy to assure, the gas plants must keep their steam host in order to meet the requirements of a cogeneration asset. The loss of QF status for the projects would be devastating as , in most cases, the lucrative PPA's would terminate as would the must-take designation of the plants; however, the risk seems remote under historical conditions and current expectations. The strong portfolio effects of the CEG assets also mitigates the loss of a single QF designation.


Structural Risks:

The structural risks stem from the prior claims of other creditors to the cash flows of the underlying projects providing cash flow to CEG. As always in financings of this type, the CEG debt is structurally subordinated to the debt at the project level. In the case of the Imperial Valley ( Salton Sea) assets the "project" debt lies at the Salton Sea Funding Corporation with the gas projects having debt at the level of the asset. So while there is legal and financial complexity within the structure there is only one level of structural subordination.


CEG is a shell company set up to house the ownership of the 14 projects. Its only assets are its interests in the equity distributions from the projects it owns. In addition to its debt service reserve CEG has a dividend trap mechanism to trap cash flow a coverage levels below 1.5 times and features a Loan Life Coverage Ratio ( LLCR) in the case of default at a project. The LLCR is calculated after a project default and captures long term impairments in cash flow.


Construction Risk:

Construction risk is limited to the new Salton Sea V unit and the Brine Processing Facilities for Salton Sea Region II. Independent assessments indicate that the technology used and the plans made are achievable for those facilities. While there are maintenance expenditures required for the continued smooth operation of the assets the budgets appear reasonable and complete, based on expert review.

No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.

ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.

CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.

All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.

To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.

NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.

Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”

Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​​​​
Moodys.com