Fitch Ratings has published an update of its 'Rating Criteria for Solar Power Projects', which describes the analytical framework Fitch applies to evaluate debt issued for a broad range of utility-scale photovoltaic (PV), concentrating PV, and concentrating solar power projects worldwide. The solar projects discussed in the report are financed as stand-alone assets (or portfolios) with no formal guarantee of debt service from the sponsors (nonrecourse).
The updated report replaces the existing criteria (published Feb. 23, 2012) without modifying Fitch's analytical approach. The report includes further clarification of Fitch's assessment of solar power projects in operation compared to projects under construction. No changes to the ratings of existing transactions are anticipated as a result of the application of the updated rating criteria.
The updated criteria report provides a summary of the broad attributes that support the ratings for solar power projects. The report highlights six key rating drivers Fitch evaluates when rating debt issued for solar power projects. The criteria report also identifies typical attributes for the six rating drivers, summarized below, which are assessed as strong, midrange, and weak.
--Completion Risk: Reasonableness of plan to achieve commercial operation considering technology risk, contractor qualifications, and construction contract terms including completion guarantees.
--Operation Risk: Stability and adequacy of plant performance supported by a qualified operator, comprehensive maintenance regime, and reliable technology.
--Revenue Risk- Volume: Measured variability of solar resource; scope, quality, and reliability of a project's energy production forecast.
--Revenue Risk- Price: Strength, duration, and flexibility of the power sales arrangement as well as the stability of the regulatory support framework.
--Debt Structure: Composition of payment terms and strength of covenants to support debt payment, maintain adequate liquidity, and limit leverage.
--Debt Service: Cash flow resiliency to support timely debt payment under base case, stress case, and break-even financial scenarios.
The full report, 'Rating Criteria for Solar Power Projects', is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'.