NEW YORK--(BUSINESS WIRE)--Fitch Ratings affirms the following ratings on total $1.2 billion debt:
Caithness Shepherds Flat, LLC:
--$525 million A-1 senior secured fixed rate loan at 'BBB-'.
--$675 million A-2 senior secured floating rate loan at 'BBB-'.
Shepherds Flat Funding Trust I:
--$420 million Series A-1-G senior secured fixed-rate trust certificates (guaranteed) at 'AAA'.
--$105 million Series A-1-a senior secured fixed-rate trust certificates (not guaranteed) at 'BBB-'.
The Rating Outlook on all ratings remains Stable.
Key Rating Drivers
--DOE Guarantees A-1-G Certificates: Shepherds Flat Funding Trust I (SFFT-I) Series A-1-G benefits from a 100% irrevocable and unconditional loan guaranty from the U.S. Dept of Energy (DOE) for principal and interest, aligning it with Fitch's rating of the U.S. sovereign at 'AAA', with a Stable Outlook.
--Strong Revenue Contracts Secure Cash Flows: The project, Caithness Shepherds Flat, LLC (CSF) has signed three fixed-price, 20-year purchase power agreements with high investment-grade utility Southern California Edison, rated 'A-' with a Stable Outlook by Fitch, that assure stable revenues for 100% of CSF's output.
-- Contractors and Sponsors are Wind Industry Leaders: Balance of plant contractor, Blattner Energy, Inc., and turbine supplier, General Electric (GE), are very large, proven and capable entities, mitigating completion risk. Fitch views favorably the experience of the developer and the financial strength of the investors.
--Consolidated Debt Metrics are Strong: The debt service coverage ratio (DSCR) profile for CSF in the Fitch rating case reflects a 1.42 times (x) average, which is consistent with investment grade. The minimum DSCR of 1.33x indicates CSF has some cushion to withstand lower wind levels in most years at the rating level.
What Could Trigger a Rating Action
--Project completion is delayed, or reflects lower than expected capacity levels;
--The wind profile is lower than expected, reducing forecast energy output;
--New GE turbine model does not perform as well as expected;
--O&M expenses are higher than forecasts;
--Downgrade of the U.S. sovereign rating that supports the Series A-1-G rating.
Security
The rated debt is secured by a first-priority lien on all CSF assets, contracts, accounts, and equity ownership.
Credit Update
As of the date of this review, construction of CSF is on schedule and on budget. Most of the balance of plant work is completed, including the substations, interconnection facilities, transmission lines, and electricity collection systems. All 338 foundations across all three phases are complete, and CSF is on track to achieve mechanical completion on 70 turbines total in Phase 1 by the end of November 2011. All 338 turbines are expected to be operational by August 2012.
Actual project costs incurred were on budget at September 30, 2011. According to the actual spending to date, the project is over 50% complete. CSF has not acknowledged any issues to Fitch that would result in a material budget increase or in completion delays.
CSF is an 845-megawatt wind-powered electric generation project under construction in Gilliam and Morrow Counties, Oregon. CSF will be located along the Columbia River Gorge, and is anticipated to be the world's largest wind farm when completed. CSF was developed by Caithness Energy, Inc., and is owned jointly by Caithness, GE Energy Financial Services, Google Inc., Sumitomo Corporation of America, and Tyr Energy.
SFFT-I is a bankruptcy remote trust, non-recourse to the owners, that issued $525 million total debt which is 80% guaranteed by the DOE. The proceeds of SFFT-I's debt issue were loaned to CSF to fund a portion of the total $1.9 billion project costs. SFFT-I reached financial close in December 2010.
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.
Applicable Criteria and Related Research:
--'Rating Criteria for Infrastructure and Project Finance' (August 16, 2011);
--'Rating Criteria for Onshore Wind Farms Debt Structures' (April 20, 2011);
--'Caithness Shepherds Flat, LLC' New Issue Report (June 1, 2011).
Applicable Criteria and Related Research:
Caithness Shepherds Flat, LLC
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=634729
Rating Criteria for Onshore Wind Farms Debt Instruments
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=620109
Rating Criteria for Infrastructure and Project Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=648832
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