Fitch Releases 2013 Outlook For North American Energy Infrastructure Projects

CHICAGO--()--Fitch Ratings' Outlook for North American energy infrastructure projects in 2013 is largely Stable according to its report, titled '2013 Outlook: Energy Infrastructure North America'. Approximately 90% of current Rating Outlooks are Stable or Positive, reflecting mostly contracted revenue streams mitigating price and volume risk among projects monitored by Fitch.

The thermal power sector carries a Stable/Negative Outlook. The outlook for contracted projects remains stable, as financial performance is supported by fixed price agreements that generally protect contracted projects from volatile market pricing. A negative outlook for merchant coal-fired projects captures the expectation of depressed gross margins and thin liquidity, with rising fuel prices and emissions-related compliance costs as longer term threats.

The outlook for existing renewable projects remains stable based on the strong, long-term revenue contracts that typically underpin cash flows. Demand for new renewable projects is expected to grow if federal tax incentives are extended and state renewable portfolio standards continue to support demand growth.

The stable outlook for oil and gas projects reflects the expectation for stable cash flows despite changing market dynamics. Projected near-term crude oil prices remain robust, although they are lower than 2012 amid increased supply and a slow economic recovery. Ample supply of shale gas will contribute to depressed gas prices that are expected to remain near current levels. Fitch's oil and gas projects are expected to maintain their investment-grade ratings in 2013 due to their strong contractual protections, parent guarantees, or strong market positions.

Outlooks could change if energy prices increase due to regulation-driven coal facility retirements, an improving domestic economy, an increase in natural gas exports, limitations imposed on shale gas exploitation, and a higher proportion of relatively expensive renewable capacity in the generation mix. Revised policy for renewables such as federal RPS, carbon tax, cap-and-trade, and renewable project master limited partnerships could benefit the renewable energy sector. Less than anticipated recovery of shale and tight oil could reduce the Brent-Western Texas Intermediate crude spread and reduce profits for refiners with access to currently discounted feedstocks. Increased pipeline infrastructure could reduce demand for existing pipelines, pressuring reservation rates for current operators.

The report is available at www.fitchratings.com.

Additional information is available at www.fitchratings.com.

Applicable Criteria and Related Research:

--'2013 Outlook: Energy Infrastructure North America'.

Applicable Criteria and Related Research: 2013 Outlook: Energy Infrastructure North America

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Contacts

Fitch Ratings
Gregory Remec
Senior Director
+1-312-606-2339
Fitch, Inc.
70 West Madison
Chicago, IL 60602
or
Tom McCormick
Managing Director
+1-212-908-1235
or
Media Relations
Brian Bertsch
+1-212-908-0549
brian.bertsch@fitchratings.com

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Contacts

Fitch Ratings
Gregory Remec
Senior Director
+1-312-606-2339
Fitch, Inc.
70 West Madison
Chicago, IL 60602
or
Tom McCormick
Managing Director
+1-212-908-1235
or
Media Relations
Brian Bertsch
+1-212-908-0549
brian.bertsch@fitchratings.com