S&P Global Ratings revised its ratings outlook on Calpine Corp. to positive from stable, citing the company's substantial and ongoing deleveraging of assets.
The action follows Calpine's announcement of a $1.75 billion debt financing of its 725-MW Geysers geothermal portfolio. Since 2017, the company has eliminated $2.5 billion of debt, and the most recent transaction is expected to deleverage about $1.35 billion at the corporate level.
"We believe that Calpine's business risk weakens modestly because of a reduction in geothermal cash flow. This is because Calpine's corporate debt will now be subordinate to the project debt in relation to the highest quality margins," S&P Global Ratings said in an Oct. 17 report.
The rating agency affirmed Calpine's B+ issuer credit rating and said an upgrade of the company would "depend on its financial sponsor's willingness to keep and sustain adjusted debt to EBITDA in at around 4.5x."
Calpine is owned by private equity firm Energy Capital Partners.
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