Research Update: Panoche Energy Center LLC Senior Debt Rating Lowered To 'B+' On Operational Outages; Outlook Revised To Negative

California-based electric power generator Panoche Energy Center LLC (PEC) experienced prolonged forced outages on three of its four combustion turbines (CT) in 2023, leading to reduced revenues, increased expenses and a near break-even full year debt service coverage ratio (DSCR). The project also experienced operational underperformance related to its power purchase agreement (PPA) with Pacific Gas&Electric Co. (PG&A) in 2019 and 2020. For 2024, we expect higher repair, maintenance, and insurance expenses related to prior-year outages to impair cash flow available for debt service (CFADS), leading to DSCR near 1x for a second consecutive year. Therefore, we downgraded its senior secured bonds due July 2029 to 'B+' from 'BB-'. We revised the outlook to negative from stable. The

...- California-based electric power generator Panoche Energy Center LLC (PEC) experienced prolonged forced outages on three of its four combustion turbines (CT) in 2023, leading to reduced revenues, increased expenses and a near break-even full year debt service coverage ratio (DSCR). - The project also experienced operational underperformance related to its power purchase agreement (PPA) with Pacific Gas & Electric Co. (PG&A) in 2019 and 2020. - For 2024, we expect higher repair, maintenance, and insurance expenses related to prior-year outages to impair cash flow available for debt service (CFADS), leading to DSCR near 1x for a second consecutive year. - Therefore, we downgraded its senior secured bonds due July 2029 to 'B+' from '##-'. We revised the outlook to negative from stable. - The negative outlook incorporates the risk of higher-than-expected expenses and continued lower operating performance due to unexpected engine failures over the next 12 months. - The '2' recovery rating indicates...

Research Update