Fitch Affirms 'BB' and 'BB-' Ratings of Coleto Creek WLE, LP.CHICAGO -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the 'BB' and 'BB-' ratings on Coleto Creek Power, LP's (Coleto) $240 million secured 1st lien term loan due 2011 (B loan) and $150 million secured 2nd lien term loan due 2012 (C loan) , respectively. The affirmation reflects Coleto's actual financial performance and considers the recent announcement by Coleto's owners that the project will be sold to International Power plc (Issuer Default Rating of 'BB' by Fitch). Upon completion of the transaction, Coleto's owners intend to use a portion of the proceeds to retire Coleto's outstanding project debt, including the B and C loans. Fitch believes that Coleto's credit quality is not affected by the announced sale; Coleto's credit quality has been evaluated on a stand-alone basis, independent of the credit quality of its owners. The ratings on the loans will be withdrawn once the transaction has closed and the loans are fully repaid. Independent of the sale, Fitch views the current outstanding principal balance of the loans as consistent with the sponsors' original projections, taking into account Coleto's financial performance and the prefunding of certain capital improvements. The facility has not experienced any unusual operating difficulties, and Coleto's expected financial performance has not been threatened by a downward shift in the forward curve for electricity prices or a significant increase in coal prices. The ratings are currently constrained con·strain tr.v. con·strained, con·strain·ing, con·strains 1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force. 2. by the refinancing risk In banking and finance, refinancing risk is the possibility that a borrower cannot refinance by borrowing to repay existing debt. Many types of commercial lending incorporate bullet payments at the point of final maturity; often, the intention or assumption is that the borrower associated with the projected balances of the loans at maturity. On March 31, 2006, the outstanding balance of the B loan was reduced to $211.2 million after a $14.6 million mandatory aggregate principal payment and a $0.6 million advance repayment. In addition, the C loan was reduced to $53.8 million after a $3.7 million mandatory aggregate principal prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. . While the B loan's outstanding balance appears unfavorable compared to original projections, it is important to note that Coleto funded the capital expenditure reserve account ahead of schedule with approximately $32 million. The deposit to the reserve was made due to the acceleration of the installation of the baghouse, which will enable the plant to utilize permitted fuel flexibility while staying within opacity Refers to being "opaque," which means to prevent light from shining through. For example, in an image editing program, the opacity level for some function might range from completely transparent (0) to completely opaque (100). limitations. Coleto intends to complete the relevant capital improvements in 2007. Of the $32 million reserve deposit, 75% of the funds would otherwise have been available to prepay the B loan. While Coleto may incur slightly higher interest costs in the short term, the prefunding of capital improvements will not have a material impact on the balance of the loans at maturity. Absent the effect of the reserve deposit, Coleto's financial performance would have been sufficient to prepay the B loan by an additional $5 million beyond the projected outstanding balance. For the 2005 fiscal year, Coleto's operational and financial performance exceeded expectations. Coleto earned additional revenue on merchant output due to high spot prices and qualified for bonus payments under existing power purchase agreements. Bonus payments are based on the facility's availability factor The availability factor of a power plant is the amount of time that it is able to produce electricity over a certain period, divided by the amount of the time in the period. Occasions where only partial capacity is available may or may not be deducted. , which averaged 97.8% in 2005. Revenues were partially offset by higher fuel expenses, as Coleto purchased higher-priced imported coal during a temporary disruption in domestic rail services that delayed deliveries delayed delivery Delivery of a certificate after the day on which delivery would occur with a regular-way contract. Delayed delivery is sometimes specified by the seller when the order to sell is entered. See also seller's option contract. of Powder River Basin The Powder River Basin is a region in southeast Montana and northeast Wyoming about 120 miles east to west and 200 miles north to south known for its coal deposits. It is both a topographic drainage and geologic structural basin. (PRB PRB Pharmaceutical Resources Branch ) coal. The rail service issues have been resolved, and coal deliveries have been uninterrupted thus far in 2006. Coleto acquired an additional coal train under a five-year lease to mitigate the effect of potential future rail disruptions. Coleto Creek Power, LP is indirectly owned by Sempra Energy Sempra Energy NYSE: SRE is a San Diego, California-based energy services holding company that was founded in 1998. Sempra owns the Southern California Gas Company, San Diego Gas & Electric, Sempra Commodities, and Sempra Generation. Partners, a subsidiary of Sempra Energy, and Carlyle/Riverstone, an energy and power-focused private equity fund. The project consists of a base-load, coal-fired generation facility with a net capacity of 632 MW, a coal-blending facility and five coal trains located in Goliad County, TX. Coleto currently sells energy and capacity to investment-grade counterparties under multiple power purchase agreements expiring between 2008 and 2014. Contractual revenues contribute approximately 90% of total revenues through 2007. Uncommitted output is sold on a merchant basis and represents between 10% of total capacity until 2007, 30% until 2008, and over 98% thereafter. Sempra Texas Services, an affiliate of Sempra Energy, oversees operations, markets energy and capacity, procures fuel, and provides general management services. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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