KBRA Assigns BBB Preliminary Ratings to Geysers Power Company, LLC’s Senior Secured Notes Due 2039

NEW YORK--()--Kroll Bond Rating Agency (KBRA) assigns BBB preliminary ratings to the Interest-Only Senior Secured Notes and the Amortizing Senior Secured Notes due in 2039 (the “Notes”) issued by Geysers Power Company, LLC (“The Geysers”), a special-purpose bankruptcy remote entity, for a combined principal amount of $1.35 billion. The Outlook is Stable. Assignment of the final ratings are subject to the receipt of final legal documents that are consistent with the project documents, draft transaction documents and other information made available to us.

Geysers Power Company, LLC

 

Initial Amount

KBRA Preliminary Rating / Outlook

Tranche A Notes

Interest-Only Senior Secured Notes due 2039

$650 million

BBB / Stable

Tranche B Notes

Amortizing Senior Secured Notes due 2039

$700 million

BBB / Stable

Term Loan A due 2029

$400 million

NR

Revolving Credit Facility due 2026

$320 million

NR

In addition to the Notes, The Geysers intends to issue a $400 million Term Loan A due 2029 and a $320 million Revolving Credit Facility due 2026. These facilities are pari passu and cross-collateralized. The Geysers is wholly owned by Calpine Corporation (the “sponsor”). The proceeds of the Notes and the Term Loan will be used to prepay Calpine corporate debt, fund the Major Maintenance Reserve Account, and make a distribution to the sponsor.

The Geysers is the largest geothermal field in the world, located in the Mayacamas Mountains in northern California (approximately 100 miles north of San Francisco); its steam fields cover more than 45 square miles and contain over 300 production wells. The Geysers consists of 13 geothermal projects (each a “facility” and collectively the “facilities”) totaling 1,286 MW of nameplate capacity (net nominal capacity of 725 MW), located in the NP-15 zone of the California market. These facilities account for approximately 34% of the geothermal energy produced in the United States. This is a key baseload, renewable source in a state with some of the most aggressive Renewable Portfolio Standards (“RPS”) in the country. The Geysers represents approximately 7% of the 33% RPS required by 2020 and is the largest portion of California’s baseload renewable capacity.

The Notes will benefit from a Debt Service Reserve Account that covers 12 months of scheduled interest and principal on the Notes backed by the Revolving Credit Facility. There will also be a 6-month Major Maintenance Reserve Account, which will be cash-funded at close and will be replenished or released based on a 6-month forward looking calculation by cash flow to equity.

The BBB preliminary ratings on the Notes, which have an anticipated maturity date of December 2039, reflect KBRA’s view of the project’s strong operating history with a sustainably managed resource and its financial risk profile. The Stable Outlook reflects KBRA’s view that the strong regulatory framework in California will continue to support the project’s low business risk profile as RPS requirements continue to increase. KBRA expects that The Geysers will continue to be successfully operated and maintained and that PPAs will be re-contracted as they mature.

Under KBRA’s rating case, we expect the project to have average debt service coverage ratios of 2.05x. The project will have $650 million of debt outstanding at maturity in December 2039. KBRA believes that the refinancing risk is manageable given the discounted cash flows available for debt service to debt ratio of 2.96x in the rating case.

The rating is based on KBRA’s Global Project Finance Rating Methodology, published November 28, 2017.

A detailed report will be forthcoming.

Related Publications: (available at www.kbra.com)

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About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

Contacts

Analytical:

Adeeti Amin, Associate Director
(646) 731-2332
aamin@kbra.com

Andrew Lin, Senior Director
(646) 731-2483
alin@kbra.com

Business Development:

Kathryn Bai, Associate
(646) 731-3351
kbai@kbra.com

Contacts

Analytical:

Adeeti Amin, Associate Director
(646) 731-2332
aamin@kbra.com

Andrew Lin, Senior Director
(646) 731-2483
alin@kbra.com

Business Development:

Kathryn Bai, Associate
(646) 731-3351
kbai@kbra.com