Fitch Ratings has affirmed the BBB- rating on $850 million senior secured notes due in 2039 at Topaz Solar Farms LLC. Construction progress at the 550 MW solar farm in San Luis Obispo County, Calif., is more than one-third complete and ahead of schedule, with no major construction issues, the rating agency notes. The rating outlook remains stable.
According to Fitch, contractor First Solar Inc. is performing well under its engineering, procurement, and construction (EPC) contract. If First Solar is unable to meet its EPC obligations, Fitch believes Topaz can still reach completion and maintain projected coverage ratios based on the robust equity commitment from sponsor MidAmerican Energy Holdings Co., substantial project liquidity and sufficient availability of alternate construction and panel suppliers.
In addition, the revenues of Topaz are anchored by an investment-grade utility offtaker, Pacific Gas & Electric Co., under a long-term, fixed-price power purchase agreement that provides a six-month cushion beyond the expected debt maturity.
Topaz features a six-month operating reserve and an additional operating contingency that serve to mitigate operating cost risk through debt maturity. Under the Fitch base case, the company evaluated operating costs under the fixed-price, all-inclusive operating contract with First Solar, while the Fitch rating case considers a higher cost structure if First Solar is replaced as operator.
In total, construction was 35% complete at the end of February, compared to 22% projected under the baseline schedule. Independent engineer Black & Veatch confirmed that actual field installation is one month ahead of schedule. Construction spending through December 2012 was 7.2% below the projected spending to date, reflecting timing issues as well as some lower actual costs, Fitch adds.