Coso Geothermal Power Certificates Re-Downgraded by Fitch
(Photo: Coso China Lake geothermal plant)
Alexander Richter
1 Kas 2012
Continued capacity decreases lead Fitch Ratings to downgrade Coso Geothermal pass-through certificates from 'CC' to 'CCC'
Last week, Fitch Ratings downgraded Coso Geothermal Power Holdings LLC’s (CGP) 2007 pass-through certificates (due 2026) from ‘CC’ to ‘CCC’. Of the $629MM in certificates, $517MM remain outstanding, underlining concerns of a “probable default” according to Fitch. This is Fitch’s second downgrade of the year following a shift from ‘B’ to ‘CC’ this past May.
Driven by an under-delivering resource of three inter-connected plants, capacity output has continued to contract. Operating cash flows and reserve funds remain unable to meet CGP’s long-term obligations, and therefore Fitch believes that a shortfall in necessary cash for a January 2013 payment will lead to default. Additionally, Letters of Credit to support CGP’s power purchase agreement wind down on November 30, 2012, and if financial support is not renewed or renegotiated, CGP will be faced with steeper obligations. Lastly, variable pricing on energy sales remains capped at 20% of all future revenues between mid-2014 through mid-2019 limiting price risk.
For more information on the dowgrade, see CNBC’s post: http://www.cnbc.com/id/49536777/Fitch_Downgrades_Coso_Geothermal_Power_Holdings_LLC_s_2007_Pass_Through_Trust_Certificates_to_CC
