Fitch Ratings assigns its 'F1+' rating to the $172.3 million Southern California Public Power Authority (SCPPA), CA Canyon Power Project revenue notes, 2009 series A and affirms its 'F1+' rating on the outstanding revenue notes, 2008 series A. At the closing of the 2009 series A notes, the proceeds will be used to refund the outstanding series 2008 A notes. The 2009 notes will be structured as a fixed-rate revenue notes with a 12 month final maturity. SCPPA expects to refund the notes prior to maturity with proceeds from long-term revenues bonds following receipt of the Canyon Power Project license to proceed with full construction. The repayment obligation on the notes is not conditional upon a successful take-out financing. The notes are scheduled to price on Nov. 4.
The SCPPA notes are secured by unconditional payments made under a power sales agreement with Anaheim Public Utilities (APU; rated 'AA-' with a Negative Outlook) to cover the full costs of the Canyon Power Project, including debt service on the notes. Therefore, the 'F1+' rating on the SCPPA notes reflects the credit quality of APU and the market access needed to execute a take-out financing to refinance the notes. The power sales agreement includes an absolute and unconditional take-or-pay obligation that extends for the life of the bonds. Payments are made as operating expense of APU's retail electric systems.
The 'AA-' rating on APU's revenue bonds reflects a diverse power resource mix that will be restructured in the near-term to comply with state regulatory requirements, cost pressure associated with the restructuring, competitive rates and historical political support for timely cost recovery, a stable service territory, and a high debt burden. The Negative Outlook reflects recent financial pressure at the utility in fiscal years 2008 and 2009 that has resulted in the use of reserves to provide sufficient revenues to meet the internal debt service coverage target of 1.6 times. For more information on APU see Fitch's Press Release dated Oct. 21, 2009 and available at 'www.fitchratings.com'.
The Canyon Power Project will be owned by SCPPA and operated by APU. The project will consist of a simple cycle natural gas-fired plant, consisting of four GE LM6000 combustion turbines, and related facilities. The project will have a capacity of 200 MW and an estimated project cost of approximately $277 million, including contingency funds and emission offsets, or $1,385 per kilowatt (kW) of installed capacity. SCPPA submitted its applications in December 2007 with the South Coast Air Quality Management District and the California Energy Commission (CEC). Permits from both agencies are expected by February 2010. The first two units are expected to enter commercial operation by July 2011, which will allow Anaheim to use these resources to meet its summer peak in 2011. The third and fourth units are expected to enter commercial operation around August/September 2011.
A key rating driver will be the receipt of a license and air permit, expected in early 2010, that will allow full construction to proceed on schedule.
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings
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Chris
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or
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Email: cindy.stoller@fitchratings.com
