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Moody's sees Constitution gas pipeline delay as credit negative for Talen, Empire

Moody'ssees New York regulators' move to deny a key permit for the ConstitutionPipeline LLC natural gas project as a credit negative for both andTalen Energy Supply LLC.

Empire ownsa 635-MW natural gas-fired plantin Rensselaer County, N.Y., while Talen owns the 970-MW natural gas-fired facilityin Greene County, N.Y.

In an April28 note to investors, Moody's said the state Department of EnvironmentalConservation's denialof a Clean Water Act permit to the FERC-approved gas pipeline project not only "threatensto further delay the pipeline's completion, if not halt it entirely," butalso further delays the two combined-cycle facilities from accessing cheapMarcellus Shale-produced natural gas.

Thepipeline delay will affect the potential profitability of both the facilities,although it has a "muted effect" on Talen overall given its largersize, scale and diversity of operations, Moody's said, adding that Empire mayneed to alter its gas transportation contracting strategy, "particularlysince it remains uncertain when, or if, construction on the pipeline can begin."

The projectsponsors, Williams Partners LP,Cabot Oil & Gas Corp.,Piedmont Natural Gas Co. Inc.and WGL Holdings Inc.,said they remain committedto building the project and will use "all available options" to fightthe DEC decision.

The124-mile, 650,000-Dth/d pipeline will link the Marcellus shale region and theU.S. Northeast. The project is estimated to cost $683 million.

EmpireGenerating is an affiliate of EnergyCapital Partners LLC, while Talen Energy Supply is a subsidiary ofTalen Energy Corp.