Research Update: Invenergy Outlook Revised To Negative On Weaker PJM Capacity Prices And Future Market Uncertainty; Ratings Affirmed

In June 2021, the PJM Commonwealth Edison Co. (ComEd) base residual auction (BRA) capacity prices were cleared at $68.93 megawatts per day (MW/d) for the 2022-2023 delivery year, which is significantly lower than our expectation of $110/MW/d for the same period, as well as the 2021-2022 clearing price of $195.55/MW/d, affecting Invenergy Thermal Operating I LLC's (ITOI) Nelson power plant revenues. Additionally, Ector County Energy Center LLC, other Invenergy's subsidiary which had a five-year heat rate call option (HRCO) on all its capacity through 2022, has terminated the contract following the litigation with its counterparty after the Texas winter storm in February 2021. Now, Ector is running as a merchant power plant, which we believe has higher market risk and

...- In June 2021, the PJM Commonwealth Edison Co. (ComEd) base residual auction (BRA) capacity prices were cleared at $68.93 megawatts per day (MW/d) for the 2022-2023 delivery year, which is significantly lower than our expectation of $110/MW/d for the same period, as well as the 2021-2022 clearing price of $195.55/MW/d, affecting Invenergy Thermal Operating I LLC's (ITOI) Nelson power plant revenues. - Additionally, Ector County Energy Center LLC, other Invenergy's subsidiary which had a five-year heat rate call option (HRCO) on all its capacity through 2022, has terminated the contract following the litigation with its counterparty after the Texas winter storm in February 2021. Now, Ector is running as a merchant power plant, which we believe has higher market risk and cash flow volatility than a contracted power plant. - Though Invenergy's current financial performance is strong, we expect that in the next few years the project will be exposed to higher market headwinds, which could result...

Research Update