Fitch Downgrades FPL Energy National Wind OpCo Sr. Secured to ‘BB+’ & HoldCo to ‘B’
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Key Rating Drivers
--Revenue Shortfalls: Revenues are derived under long-term contracts and are expected to remain consistent with historical results but have been significantly lower than original projections, primarily due to lower than projected wind resources.
--Increased Costs: Operating and maintenance (O&M) expenses have persisted at levels well above expectations, and recent sponsor projections confirm O&M expenses are expected to remain near current levels.
--Reduced Financial Cushion: Financial performance in recent years has been lower than projected, and will be subject to further pressure subsequent to expiration of the production tax credits (PTC) in 2013. Lower than average wind conditions in any year may require a draw on reserves, particularly for the HoldCo debt.
What Could Trigger a Rating Action
--Change in Operating Expenses: A material change in O&M expenses could positively or negatively impact the rating level;
--Reduced Availability: A persistent reduction in availability from historical levels may result in further downgrades.
Security
The project debt at the Opco is secured by all tangible and intangible assets, including real and personal property, a security interest in all bank accounts, insurance policies, and project contracts. Distributions from the Opco are the Holdco's sole source of revenues.
Credit Update
The downgrade reflects Fitch's expectation that revenue and expense levels are likely to remain consistent with historical results, which persistently have been below original projections. Operationally, the portfolio has maintained strong availability levels, but the higher cost structure has significantly eroded coverage levels. The project sponsor has confirmed that operating costs are not expected to be reduced significantly going forward. Wind resources significantly below historical averages will further reduce coverage levels and may threaten the project's ability to make all debt service payments without relying on reserves. Favorably, a one-year debt service reserve and
2010 DSCR as calculated by Fitch was above 1.20 times (x) for the OpCo and near breakeven for the HoldCo. Year to date Q2'11 revenues have increased by 3% compared to the same period last year due to increased production, supporting a stable projected annual DSCR. Cash was trapped for the first half 2010 payment after the project failed to clear distribution thresholds. Projected Opco DSCRs range between 1.00x and 1.30x through maturity in Fitch's rating case, which uses production levels at the low end of historical results. Projected rating case HoldCo DSCRs average near breakeven through maturity, suggesting a potential reliance on liquidity reserves. DSCRs are substantially reduced for both debt classes following expiration of portfolio PTC revenues in 2014.
The Opco is a portfolio of nine operating wind farms with an aggregate capacity of approximately 533.5 MW. Each project company is wholly-owned by the Opco and is otherwise unencumbered with project-level indebtedness. All of the output of each wind farm is committed under long term power purchase agreements with counterparties that are unaffiliated with the Opco. Under the agreements, the Opco generally receives a fixed-energy price for all energy produced by the wind farm, and the counterparty generally pays all costs associated with transmission and scheduling. Distributions from the Opco are the Holdco's sole source of revenues. The HoldCo is an indirect, wholly-owned subsidiary of NextEra Energy Capital Holdings, Inc. 'NextEra' (rated 'A-'/Stable by Fitch).
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
--'Rating Criteria for Infrastructure and Project Finance' (
--'Rating Criteria for Onshore Wind Farm Debt Instruments' (
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832
Rating Criteria for Onshore Wind Farms Debt Instruments
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=620109
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Copyright: | Copyright Business Wire 2012 |
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