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Rating Action:

Moody's affirms Solar Star's Baa2 rating and changes outlook to stable from negative

31 Jul 2019

Approximately $1.2 billion of debt affected

New York, July 31, 2019 -- Moody's Investors Service ("Moody's") affirmed Solar Star Funding, LLC's (Solar Star) Baa2 on its senior secured bonds due 2035 and changed the outlook to stable from negative.

RATINGS RATIONALE

The affirmation of Solar Star's Baa2 rating and change in outlook to stable reflects the improvement of Southern California Edison Company's (SCE) credit profile whose issuer rating was affirmed at Baa2 and outlook revised to stable from negative on July 29, 2019. While the project's underlying financial and operating performance has been much stronger than the original Moody's case, Solar Star's rating is capped by the credit quality at SCE since the project derives all of its revenue and cash flow under a long-term power purchase and sales agreement (PPA) with SCE that expires in July 2035. SCE's rating action was driven by the California government's passage of the AB1054 legislation that provides for a wildfire liability fund for investor owned utilities, a cap on wildfire liabilities subject to conditions, and a more favorable prudency standard regarding the recovery of wildfire costs. Please see Moody's press release on SCE dated July 29, 2019 for additional information on SCE.

The rating affirmation recognizes Solar Star's financial and operating performance over the past two years, and also benefits from ownership by Berkshire Hathaway Energy Company (A3 stable), low carbon transition risk, and traditional project finance protections. For the last twelve months ending March 2019, we estimate Solar Star had debt service coverage ratio (DSCR) around 1.60x according to Moody's standard calculations. While the project has been negatively affected by weather and curtailment in the first half of 2019, we expect Solar Star will continue to maintain DSCR for 2019 within our long term expected range of 1.50x to 1.80x depending on the solar resource, curtailment levels and overall operating performance.

Rating Outlook

Solar Star's stable outlook reflects the stable outlook on SCE and our expectations that the project will achieve DSCR in the 1.50x to 1.80x range.

Factors that could lead to a downgrade

Solar Star's rating would likely be downgraded should SCE be downgraded from its current rating level given the project's reliance on the off-taker for all of its revenues and cash flow or if the project experiences major operational or financial problems.

Factors that could lead to a upgrade

Solar Star's rating could be upgraded if SCE's credit profile, including its senior unsecured debt or issuer rating were to be raised from the current level and if the project's operational and financial performance remains in line with expectations.

Solar Star Funding, LLC is an indirect wholly-owned subsidiary of Berkshire Hathaway Energy Company (BHE, A3 stable) formed to own 586 MWac of photovoltaic solar generating facilities using single axis tracking in Kern and Los Angeles Counties, California. The Project is comprised of two separate facilities, the 310 Mwac, SS1 and the 276 Mwac SS2, both of which were initially developed by SunPower, and acquired by BHE in December 2012. As of December 30, 2018, the project had $1.2 billion of senior secured bonds outstanding.

The principal methodology used in these ratings was Power Generation Projects published in June 2018. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Clifford J Kim
VP-Sr Credit Officer
Project Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

A.J. Sabatelle
Associate Managing Director
Project Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

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.

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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.

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