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Strong performance delivers ratings benefit for solar projects

A track record of better-than-expected production has allowed solar power plants to achieve investment-grade ratings with lower debt-service coverage ratios than wind farms, which have tended to underperform relative to initial estimates, Fitch Ratings said.

The firm found that solar projects generally met or beat initial P50 forecasts — the annual production level projects are expected to exceed half of the time — and only 3% fell significantly short of that benchmark. In contrast, approximately three-quarters of wind projects were below P50 levels, with 43% significantly underperforming.

"The track record of solar projects is shorter, but they clearly have lower operational risk, better generation performance and lower volatility than wind projects," Fitch Ratings said in a news release. That has generally loosened requirements on the amount of cash flow projects need available to pay current debt obligations in order to be considered low to moderate credit risks, the firm said.

Fitch said technical challenges associated with wind forecasting led some initial analyses to overestimate power production. Some projects also were hurt by higher natural resource volatility, including poor wind conditions in the Western U.S. in 2016, as well as equipment problems.

Fitch examined wind projects in the U.S., Latin America, Europe, the Middle East and Africa, as well as solar projects in the U.S., Europe, the Middle East and Africa.