The announced sale of Terra-Gen Power LLC’s Alta Wind projects Phases I-V, X, and XI (947 megawatts (MW)) to NRG Yield Inc. (a subsidiary of NRG Energy) presents no immediate credit implications for the Alta Wind 2010 pass-through trust certificates (Alta, ‘BBB-‘, Outlook Stable) based on the current understanding of the proposed structure, according to Fitch Ratings.
The project companies, Phases II – V (570 MW), are security for the rated certificates and are bankruptcy remote, special purpose vehicles that are separate and distinct from the sponsor and any intermediate holding companies. Fitch expects these features to remain in position upon a successful closing of the proposed transaction. Further, Terra-Gen Operating Company LLC will remain the operator of the rated projects.
Prior to closing of the announced sale, Fitch will evaluate if the transaction has altered any features relating to the ring fenced structure currently in position and determine if augmentations warrant a rating action. Fitch will analyze the structures’ ability to prohibit potential guarantees and cross default provisions to other non-project existing and future debt as well as restrictions on the comingling of cash flow from the projects.
The proceeds from the transaction are expected to retire debt at Terra-Gen Finance Company LLC, make distributions to owners, and be used for additional corporate purposes. Currently, there is no expectation that NRG will prepay or otherwise seek to alter the rated debt at Alta.
Alta consists of special purpose companies created solely to develop, own, and operate the 570 MW wind farm located in the Tehachapi Pass near the town of Mojave in southwestern California. Alta sells energy output to Southern California Edison (‘A-‘, Outlook Stable) under a fixed-price power purchase agreement expiring Dec. 31, 2035. Alta used the proceeds of the certificates to fund the project’s construction and reimburse the sponsor, Terra-Gen Power LLC, for development costs.