S&P downgrades 2 PJM coal-fired power producers on likely default

New York — S&P Global Ratings on February 14 lowered the senior secured ratings of Longview Power LLC and Chief Power Finance LLC as the rating agency believes that the merchant power producers are likely to default in the next six and 12 months, respectively. Outlooks are negative.

Ratings lowered Longview Power's senior secured debt to CCC- from CCC, with expectations that the project will default within six months due to the company's weak credit position, along with current market conditions and weak power prices since the agency's last forecast.

"The CCC- rating reflects our view that lower-than-expected power prices in the [PJM] Interconnection in recent months will leave the project with insufficient liquidity to repay its outstanding revolver balance when it comes due in April 2020," Ratings wrote in a report.

Longview Power is a project-financed entity which operates the 700-MW Longview Power coal-fired power plant in Monongalia County, West Virginia. which began operating in December 2011. It sells its output into the PJM Interconnection.

Likewise, Ratings also lowered the term loan rating of Chief Power Finance to CCC from CCC+, with expectations that the project will default over the next 12 months.

"[Chief Power Finance] currently faces heightened refinancing risk as its term loan B matures in December 2020. We forecast total debt outstanding at maturity in December 2020 between $310 million and $320 million, higher than our previous forecasts," Ratings said in a report.

Chief Power Finance is a project-financed portfolio that owns partial interests in the 1,711-MW Keystone and the 1,711-MW Conemaugh coal-fired power plants in Pennsylvania. Both plants sell their output into the PJM Interconnection.

Ratings believes that the project may be unable to refinance because of its higher anticipated outstanding balance, low PJM power prices and the lenders' reticence to finance coal-fired power plants.