Panoche Energy Center LLC Sr. Debt Downgraded To 'BB' (Recovery Rating '2') On Carbon Compliance Costs; Outlook Stable

Panoche Energy Center LLC (PEC) is a special-purpose, bankruptcy-remote operating company formed to own and operate a 400-megawatt (MW) natural gas peaker plant in California that has a power purchase agreement(PPA) with Pacific Gas&Electric Co. (PG&E). We downgraded the rating on PEC's senior debt to 'BB' from 'BBB-' because we expect that PEC will be fully exposed to the cost of carbon compliance starting in 2018. We estimate the total compliance cost through 2028 to be around $40 million, leading each year to lower debt service coverage that is inconsistent with the prior rating. The outlook is stable. We assigned a recovery rating of '2', indicating our expectation of substantial (70%-90%; rounded estimate 75%) recovery in the event

...+ Panoche Energy Center LLC (PEC) is a special-purpose, bankruptcy-remote operating company formed to own and operate a 400-megawatt (MW) natural gas peaker plant in California that has a power purchase agreement(PPA) with Pacific Gas & Electric Co. (PG&E). + We downgraded the rating on PEC's senior debt to '##' from '###-' because we expect that PEC will be fully exposed to the cost of carbon compliance starting in 2018. We estimate the total compliance cost through 2028 to be around $40 million, leading each year to lower debt service coverage that is inconsistent with the prior rating. The outlook is stable. + We assigned a recovery rating of '2', indicating our expectation of substantial (70%-90%; rounded estimate 75%) recovery in the event of a payment default. SAN FRANCISCO (S&P Global Ratings) March 28, 2017--S&P Global Ratings today lowered its rating on PEC's $321 million senior secured bonds due 2029 ($254.5 million outstanding as of January 2017) to '##' from '###-'. With the...

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