DUFF & PHELPS: CALIFORNIA ENERGY COMPANY CONVERTIBLE SUBORDINATED DEBENTURES RATED 'BB-'
CHICAGO, June 15 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of `BB-' (Double-B-Minus) to California Energy's (CE) proposed offering of $100 million of three-year no-call convertible subordinated debentures. These securities would rank pari passu with up to $50 million of the 9.5 percent convertible subordinated debentures due 2003, if these are issued at the company's option in exchange for the company's Series C preferred stock. CE's outstanding senior notes due 1995, totalling $36 million, have been reaffirmed at `BBB' (Triple- B). CE owns a 50 percent interest in and is the operator of the three Coso geothermal power generation projects. The Coso projects have a combined capacity of 240 mw. Coso's $560 million senior debt (which carries a D&P rating of `BBB' (Triple-B)) is non-recourse to CE and the other Coso partners. Southern California Edison purchases all of the output from Coso under existing take-and-pay contracts which have maturities of 20-30 years. The Coso investment, which represents the majority of CE's assets, currently provides dependable cash flows to cover payments of its outstanding senior notes and should help support financing for the new subordinate issue. CE has plans to significantly diversify beyond domestic geothermal projects and into offshore power generation projects of which CE would be part owner and chief operator. CE, in partnership with Peter Kiewit Sons, Inc., has submitted three joint bids for geothermal opportunities in the Philippines. In addition, CE is considering joint venture opportunities in Pakistan, Indonesia, Malaysia, and the former Soviet Republic. The company and its partner, Peter Kiewit, appear dedicated to taking all possible steps to mitigate risks in these projects. However, success will depend on local economics and government stability. The rating reflects the expectation that proceeds from the new convertible subordinated debenture financing will be used primarily to fund equity investments in offshore power generation ventures. D&P's `BBB' rating on the outstanding senior notes remains unaffected as a result of the strong, dependable cash flows from Coso and the timing of the notes' maturity in 1995. The Coso standard offer-4 contracts enter a scheduled reduction of rates for power sold in the 1997-2000 period. The 1995 maturity on the senior notes will occur well in advance of the rate reduction period and any materialization of the potential risk inherent in the offshore investments. These funds are projected to be used in the next three to five years. California Energy is a leading power producer generating electricity mainly from natural steam resources. The company owns the rights to prospective geothermal properties in Oregon, Washington, California, Utah and Nevada. -0- 6/15/93 /CONTACT: John C. Dell of Duff & Phelps Credit Rating Co., 312-368-3161/ (CE)
CO: California Energy ST: California IN: UTI SU: RTG
WB -- NY111 -- 2375 06/15/93 17:32 EDT
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|Date:||Jun 15, 1993|
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