Fitch: Weak U.S. Demand, Low Prices, & Rising Compliance Costs May Hit Thermal Project Ratings

NEW YORK--()--While thermal project performance is largely stabilized by contracts, ratings may be pressured by market dynamics including slow demand growth, low electricity prices, and growing environmental compliance costs, according to a new Fitch Ratings report.

"Merchant generators face increased pressure due to environmental regulation and weak demand, while geothermal, biomass and waste to energy projects face greater supply risks," said Greg Remec, Senior Director. "The natural gas industry's slow response to low oil prices creates uncertainty for the electricity market."

Key factors affecting thermal power projects include:

--Fixed price tolling agreements mitigate fuel price risk, and market-based heat rate penalties are minimized in a low natural gas price environment.

--Power purchase agreements typically provide protection against environmental legislation and pass through the associated costs to counterparties.

--Poor fundamental backdrop in Europe, with weak demand and growth of renewables shifting down merit order.

For more information, a special report titled "Thermal Power Projects - 2016 Briefing" is available on the Fitch Ratings web site at www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

Thermal Power Projects -- 2016 Sector Briefing

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=877914

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Contacts

Fitch Ratings
Greg Remec
Senior Director
+1 312-606-2339
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Federico Gronda
Senior Director
+0039 02879 087287
or
Glaucia Calp
Senior Director
+57 1 326 9999
or
Christopher Joassin
Director
+1 312-368-3166
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com

Contacts

Fitch Ratings
Greg Remec
Senior Director
+1 312-606-2339
Fitch Ratings, Inc.
70 W. Madison St.
Chicago, IL 60602
or
Federico Gronda
Senior Director
+0039 02879 087287
or
Glaucia Calp
Senior Director
+57 1 326 9999
or
Christopher Joassin
Director
+1 312-368-3166
or
Media Relations:
Alyssa Castelli, +1 212-908-0540
alyssa.castelli@fitchratings.com