Email Research
Thank you for your interest in sharing Moody's Research. You have reached the daily limit of Research email sharings.
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
Accept our 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 information 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
10 Mar 2011
Approximately $1.16 billion of securities affected
New York, March 10, 2011 -- Moody's Investors Service has downgraded TPF Generation Holdings,
LLC's (TPF Generation) first lien senior secured credit facilities
to B1 from Ba3 and changed the outlook to negative from stable.
At the same time, Moody's has affirmed the B3 rating on the
second lien credit facility and also changed its outlook to negative from
stable. The first lien credit facilities that are affected are
an original $850 million term loan due 2013 (approx. $365
million currently outstanding), a $250 million synthetic
letter of credit facility also due 2013, and a $50 million
synthetic working capital revolving credit facility due 2011. The
second lien credit facility consists of a $495.0 million
term loan due 2014 (all of the $495 million is currently outstanding).
RATINGS RATIONALE
The rating action reflects TPF Generation's increasing exposure
to merchant power prices after December 2011, and full merchant
power price exposure after December 2012, when two heat rate call
options expire respectively at the two combined cycle plants in the portfolio.
There currently are no new agreements in place to extend or replace these
agreements. In addition, the rating action reflects concerns
about exposure to low PJM RPM capacity prices starting with the 2012/2013
delivery year. While the low merchant power and capacity prices
are not expected to result in a possible payment default, these
factors could result in a potential financial covenant violation on the
part of TPF Generation and contribute to greater refinancing risk than
expected when Moody's first rated this debt.
Two of the largest assets in the TPF Generation portfolio, High
Desert and Rio Nogales, benefit from power offtake agreements.
The High Desert facility, the largest combined-cycle asset
in the portfolio, had a power purchase agreement (PPA) with the
California Department of Water Resources (CDWR: Aa3) that expired
in January 2011, but it now benefits from an energy call option
agreement with J. Aron & Company from February 2011 to December
2012, that immediately follows the expiration of the CDWR agreement.
Rio Nogales also has a heat rate call option agreement with J.
Aron, which runs from October 2008 through December 2011.
As there are currently no new agreements in place to extend or replace
these agreements, these two plants will become exposed to merchant
power prices starting after December 2011 and December 2012.
The TPF Generation portfolio also consists of three peaking units that
bid their capacity into PJM's RPM market, for which the facilities
earn capacity revenues. The RPM capacity revenues, which
are known through May 2014, provide a degree of cash flow predictability
at least through that date. However, recent RPM clearing
prices have been lower than had been expected beginning in June 2012,
when the capacity price is just $16.46/MW-day.
The capacity price for the delivery year beginning in June 2013 is higher
at $27.73/MW-day, but this is still below what
forecasters had expected for the PJM capacity market when Moody's
first rated the debt. As a result, the TPF Generation portfolio
of assets will over time become increasingly exposed to merchant energy
revenues and RPM capacity revenues in an operating environment of low
capacity and electricity prices. Based upon Moody's analysis,
given currently low prices in the merchant energy markets and low known
capacity prices, TPF Generation is not expected to suffer a potential
payment default, but it could under certain downside scenarios violate
one of its financial covenants (the leverage ratio covenant in 2012 or
2013), and it will have higher than expected refinancing risk in
2013, when the first lien debt becomes due.
Moody's notes that the five facilities making up the TPF Generation
portfolio have been performing well to date from an operational standpoint.
In addition, TPF Generation has historically produced improving
credit metrics, and the first lien term loan has been reducing as
a result of the 100% excess cash flow sweep. The second
lien term loan, which matures a year later in 2014, has not
been reduced because the sweep will not apply until the first lien is
fully repaid. The second lien has been current on its interest.
In addition, Moody's notes that TPF Generation does have liquidity
in the form of a cash-funded 6-month debt service reserve.
This gives the project flexibility during a period of low power prices
and margin compression. Therefore, Moody's is not lowering
the rating below B1 on the first lien at this time.
There is time for the ratings drivers to change. Merchant power
prices and capacity prices could rebound or the facilities could enter
into new agreements with investment grade counterparties that could provide
stability to the cash flows. Furthermore, there is time for
Tenaska Power Fund, the project's sponsor, to work out
solutions, including strategic options, especially if capacity
prices improve after the next RPM auction scheduled for May 2011 for delivery
year 2013/2014.
The generation portfolio consists of five natural gas-fired generation
facilities, of which two are combined cycle facilities and three
are simple cycle peaking facilities. Moody's believes there
is real value in TPF Generation, especially in the two combined
cycle units, and that the longer term recovery prospects for the
holders of the debt, including the second lien debt, should
be good. Therefore, Moody's is not lowering the first
lien debt below B1 at this time and is narrowing the notching between
the two classes of debt to two notches from three and is keeping the rating
on the second lien at B3, reflecting the value of the portfolio.
The negative outlook reflects Moody's expectation that power prices
and merchant energy prices will remain low. The longer term outlook
for the project is highly dependent upon a significant strengthening of
power markets. Moody's also notes that TPF Generation faces
increased refinancing risk in 2014 at a time when it is reliant upon merchant
cash flows.
The rating is not likely to be revised upward in the near term.
The outlook can be revised to stable if there is significant improvement
in power prices and capacity prices such that a potential covenant violation
could be averted and the refinancing risk reduced. The rating could
be revised downward if it becomes clear that the financial situation worsens
more than expected or if there are operational problems at either of the
two important combined cycle facilities.
The principal methodology used in this rating was Power Generation Projects
published in December 2008.
The last rating action on TPF Generation occurred on December 16,
2008, when Moody's affirmed the ratings of Ba3 and B3 for
the first and second lien facilities, respectively.
TPF Generation Holdings, LLC (TPF Generation) is an indirect subsidiary
of Tenaska Power Fund, L.P. (Tenaska), and is
a special purpose entity formed to acquire and operate several generation
facilities across the continental United States. The portfolio
was acquired from Constellation Energy, and the facilities are located
in five states, with a total production capability of 2,480
MW. Electricity from the plants is sold into three regional transmission
grids; CAISO, ERCOT and the PJM Interconnection. The
generation portfolio currently consists of five natural gas-fired
generation facilities, of which two are combined-cycle facilities
and three are simple-cycle peaking facilities.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Richard E. Donner
VP - Senior Credit Officer
Project Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Chee Mee Hu
MD - Project Finance
Project Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades TPF Generation to B1 from Ba3, outlook negative.
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.
|
|
